Should Income Investors Look At Chocoladefabriken Lindt & Sprüngli AG (VTX:LISN) Before Its Ex-Dividend?

It looks like Chocoladefabriken Lindt & Sprüngli AG (VTX:LISN) is about to go ex-dividend in the next three days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Meaning, you will need to purchase Chocoladefabriken Lindt & Sprüngli's shares before the 22nd of April to receive the dividend, which will be paid on the 25th of April.

The company's next dividend payment will be CHF01400.00 per share, on the back of last year when the company paid a total of CHF1,400 to shareholders. Based on the last year's worth of payments, Chocoladefabriken Lindt & Sprüngli stock has a trailing yield of around 1.4% on the current share price of CHF0102800.00. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Chocoladefabriken Lindt & Sprüngli

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Chocoladefabriken Lindt & Sprüngli paying out a modest 48% of its earnings. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Dividends consumed 64% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's positive to see that Chocoladefabriken Lindt & Sprüngli'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?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Chocoladefabriken Lindt & Sprüngli, with earnings per share up 7.5% on average over the last five years. Decent historical earnings per share growth suggests Chocoladefabriken Lindt & Sprüngli has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Chocoladefabriken Lindt & Sprüngli has delivered an average of 8.0% per year annual increase in its dividend, based on the past 10 years of dividend payments. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

The Bottom Line

Has Chocoladefabriken Lindt & Sprüngli got what it takes to maintain its dividend payments? Earnings per share have been growing at a steady rate, and Chocoladefabriken Lindt & Sprüngli paid out less than half its profits and more than half its free cash flow as dividends over the last year. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Chocoladefabriken Lindt & Sprüngli's dividend merits.

Curious what other investors think of Chocoladefabriken Lindt & Sprüngli? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.