Four Days Left To Buy Barry Callebaut AG (VTX:BARN) Before The Ex-Dividend Date

It looks like Barry Callebaut AG (VTX:BARN) is about to go ex-dividend in the next 4 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Meaning, you will need to purchase Barry Callebaut's shares before the 8th of January to receive the dividend, which will be paid on the 10th of January.

The company's next dividend payment will be CHF29.00 per share, and in the last 12 months, the company paid a total of CHF29.00 per share. Last year's total dividend payments show that Barry Callebaut has a trailing yield of 2.0% on the current share price of CHF1419. If you buy this business for its dividend, you should have an idea of whether Barry Callebaut's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Barry Callebaut

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Barry Callebaut's payout ratio is modest, at just 36% of profit. A useful secondary check can be to evaluate whether Barry Callebaut generated enough free cash flow to afford its dividend. Barry Callebaut paid out more free cash flow than it generated - 170%, to be precise - last year, which we think is concerningly high. It's hard to consistently pay out more cash than you generate without either borrowing or using company cash, so we'd wonder how the company justifies this payout level.

Barry Callebaut 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 Barry Callebaut 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?

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. With that in mind, we're encouraged by the steady growth at Barry Callebaut, with earnings per share up 4.6% on average 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.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Barry Callebaut has delivered an average of 7.2% per year annual increase in its dividend, based on the past 10 years of dividend payments. 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

Is Barry Callebaut worth buying for its dividend? Barry Callebaut delivered reasonable earnings per share growth in recent times, and paid out less than half its profits and 170% of its cash flow over the last year, which is a mediocre outcome. All things considered, we are not particularly enthused about Barry Callebaut from a dividend perspective.

So if you want to do more digging on Barry Callebaut, you'll find it worthwhile knowing the risks that this stock faces. Our analysis shows 1 warning sign for Barry Callebaut and you should be aware of it before buying any shares.

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.