We Wouldn't Be Too Quick To Buy Riber S.A. (EPA:RIB) Before It Goes Ex-Dividend

Riber S.A. (EPA:RIB) stock is about to trade ex-dividend in 3 days time. This means that investors who purchase shares on or after the 10th of September will not receive the dividend, which will be paid on the 12th of September.

Riber's next dividend payment will be €0.02 per share, on the back of last year when the company paid a total of €0.05 to shareholders. Based on the last year's worth of payments, Riber has a trailing yield of 4.3% on the current stock price of €1.166. If you buy this business for its dividend, you should have an idea of whether Riber's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Riber

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. An unusually high payout ratio of 324% of its profit suggests something is happening other than the usual distribution of profits to shareholders. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend.

It's good to see that while Riber's dividends were not covered by profits, at least they are affordable from a cash perspective. If executives were to continue paying more in dividends than the company reported in profits, we'd view this as a warning sign. Very few companies are able to sustainably pay dividends larger than their reported earnings.

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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Riber, with earnings per share up 4.3% on average over the last five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last ten years, Riber has lifted its dividend by approximately 9.6% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

The Bottom Line

Should investors buy Riber for the upcoming dividend? The dividends are not well covered by either income or free cash flow, although at least earnings per share are slowly increasing. It's not the most attractive proposition from a dividend perspective, and we'd probably give this one a miss for now.

Ever wonder what the future holds for Riber? See what the two analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.