Umicore SA (EBR:UMI) Is About To Go Ex-Dividend, And It Pays A 3.8% Yield

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Umicore SA (EBR:UMI) is about to go ex-dividend in just four days. 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. Thus, you can purchase Umicore's shares before the 29th of April in order to receive the dividend, which the company will pay on the 2nd of May.

The company's next dividend payment will be €0.385 per share. Last year, in total, the company distributed €0.80 to shareholders. Looking at the last 12 months of distributions, Umicore has a trailing yield of approximately 3.8% on its current stock price of €20.98. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Umicore has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Umicore

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 Umicore paying out a modest 50% 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. Umicore paid out more free cash flow than it generated - 122%, to be precise - last year, which we think is concerningly high. We're curious about why the company paid out more cash than it generated last year, since this can be one of the early signs that a dividend may be unsustainable.

Umicore paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Cash is king, as they say, and were Umicore to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Umicore earnings per share are up 3.9% per annum over the last five years. Earnings have been growing somewhat, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Umicore has lifted its dividend by approximately 4.8% a year on average. 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.

To Sum It Up

Is Umicore worth buying for its dividend? Umicore delivered reasonable earnings per share growth in recent times, and paid out less than half its profits and 122% of its cash flow over the last year, which is a mediocre outcome. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Umicore's dividend merits.

So if you want to do more digging on Umicore, you'll find it worthwhile knowing the risks that this stock faces. Our analysis shows 2 warning signs for Umicore that we strongly recommend you have a look at before investing in the company.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.