Do These 3 Checks Before Buying Bystronic AG (VTX:BYS) For Its Upcoming Dividend

Bystronic AG (VTX:BYS) stock is about to trade ex-dividend in four days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. 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. In other words, investors can purchase Bystronic's shares before the 19th of April in order to be eligible for the dividend, which will be paid on the 23rd of April.

The company's next dividend payment will be CHF012.00 per share, on the back of last year when the company paid a total of CHF12.00 to shareholders. Based on the last year's worth of payments, Bystronic stock has a trailing yield of around 2.6% on the current share price of CHF0464.50. If you buy this business for its dividend, you should have an idea of whether Bystronic'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.

Check out our latest analysis for Bystronic

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Bystronic paid out 59% of its earnings to investors last year, a normal payout level for most businesses. 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. It paid out more than half (73%) of its free cash flow in the past year, which is within an average 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.

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

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're discomforted by Bystronic's 15% per annum decline in earnings in the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Bystronic's dividend payments per share have declined at 6.1% per year on average over the past 10 years, which is uninspiring. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.

The Bottom Line

Is Bystronic worth buying for its dividend? It's never good to see earnings per share shrinking, but at least the dividend payout ratios appear reasonable. We're aware though that if earnings continue to decline, the dividend could be at risk. Overall it doesn't look like the most suitable dividend stock for a long-term buy and hold investor.

Although, if you're still interested in Bystronic and want to know more, you'll find it very useful to know what risks this stock faces. Every company has risks, and we've spotted 2 warning signs for Bystronic you should know about.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.