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Readers hoping to buy Hensoldt AG (ETR:HAG) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Accordingly, Hensoldt investors that purchase the stock on or after the 28th of May will not receive the dividend, which will be paid on the 30th of May.
The company's next dividend payment will be €0.50 per share. Last year, in total, the company distributed €0.50 to shareholders. Last year's total dividend payments show that Hensoldt has a trailing yield of 0.6% on the current share price of €79.30. If you buy this business for its dividend, you should have an idea of whether Hensoldt's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
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. Hensoldt paid out 63% of its earnings to investors last year, a normal payout level for most businesses. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Over the last year it paid out 53% of its free cash flow as dividends, within the usual range for most companies.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Check out our latest analysis for Hensoldt
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Hensoldt's earnings have been skyrocketing, up 61% per annum for the past five years. Management appears to be striking a nice balance between reinvesting for growth and paying dividends to shareholders. With a reasonable payout ratio, profits being reinvested, and some earnings growth, Hensoldt could have strong prospects for future increases to the dividend.