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Readers hoping to buy Stabilus SE (ETR:STM) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase Stabilus' shares on or after the 6th of February will not receive the dividend, which will be paid on the 10th of February.
The company's upcoming dividend is €1.15 a share, following on from the last 12 months, when the company distributed a total of €1.15 per share to shareholders. Looking at the last 12 months of distributions, Stabilus has a trailing yield of approximately 3.6% on its current stock price of €31.95. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.
Check out our latest analysis for Stabilus
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Fortunately Stabilus's payout ratio is modest, at just 39% of profit. A useful secondary check can be to evaluate whether Stabilus generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 45% of the free cash flow it generated, which is a comfortable payout ratio.
It's positive to see that Stabilus's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's not ideal to see Stabilus's earnings per share have been shrinking at 2.1% a year over the previous five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past eight years, Stabilus has increased its dividend at approximately 11% a year on average.