Fundamenta Real Estate AG (VTX:FREN) Stock Goes Ex-Dividend In Just Four Days

Readers hoping to buy Fundamenta Real Estate AG (VTX:FREN) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is two business days before a company's record date in most cases, 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. Accordingly, Fundamenta Real Estate investors that purchase the stock on or after the 15th of April will not receive the dividend, which will be paid on the 17th of April.

The company's next dividend payment will be CHF00.60 per share. Last year, in total, the company distributed CHF0.60 to shareholders. Based on the last year's worth of payments, Fundamenta Real Estate has a trailing yield of 3.4% on the current stock price of CHF017.40. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fundamenta Real Estate paid out more than half (59%) of its earnings last year, which is a regular payout ratio for most companies. A useful secondary check can be to evaluate whether Fundamenta Real Estate generated enough free cash flow to afford its dividend. It paid out 87% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.

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.

See our latest analysis for Fundamenta Real Estate

Click here to see how much of its profit Fundamenta Real Estate paid out over the last 12 months.

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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Fundamenta Real Estate earnings per share are up 2.5% per annum over the last five years. A payout ratio of 59% looks like a tacit signal from management that reinvestment opportunities in the business are low. In line with limited earnings growth in recent years, this is not the most appealing combination.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Fundamenta Real Estate has delivered an average of 4.1% 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

Has Fundamenta Real Estate got what it takes to maintain its dividend payments? Earnings per share growth has been unremarkable, and while the company is paying out a majority of its earnings and cash flow in the form of dividends, the dividend payments don't appear excessive. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.

With that being said, if dividends aren't your biggest concern with Fundamenta Real Estate, you should know about the other risks facing this business. For example, we've found 4 warning signs for Fundamenta Real Estate (2 are potentially serious!) that deserve your attention before investing in the 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.