Just Four Days Till HELLA GmbH & Co. KGaA (ETR:HLE) Will Be Trading Ex-Dividend

It looks like HELLA GmbH & Co. KGaA (ETR:HLE) is about to go ex-dividend in the next 4 days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Therefore, if you purchase HELLA GmbH KGaA's shares on or after the 19th of May, you won't be eligible to receive the dividend, when it is paid on the 21st of May.

The company's next dividend payment will be €0.95 per share, on the back of last year when the company paid a total of €0.95 to shareholders. Based on the last year's worth of payments, HELLA GmbH KGaA has a trailing yield of 1.1% on the current stock price of €88.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether HELLA GmbH KGaA can afford its dividend, and if the dividend could grow.

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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. Fortunately HELLA GmbH KGaA's payout ratio is modest, at just 34% of profit. A useful secondary check can be to evaluate whether HELLA GmbH KGaA generated enough free cash flow to afford its dividend. Over the last year it paid out 51% of its free cash flow as dividends, within the usual 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.

Check out our latest analysis for HELLA GmbH KGaA

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

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's not ideal to see HELLA GmbH KGaA's earnings per share have been shrinking at 2.2% a year over the previous five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. HELLA GmbH KGaA has delivered 2.1% dividend growth per year on average over the past 10 years.

Final Takeaway

Has HELLA GmbH KGaA got what it takes to maintain its dividend payments? Its earnings per share have been declining meaningfully, although it is paying out less than half its income and more than half its cash flow as dividends. Neither payout ratio appears an immediate concern, but we're concerned about the earnings. In summary, it's hard to get excited about HELLA GmbH KGaA from a dividend perspective.

If you want to look further into HELLA GmbH KGaA, it's worth knowing the risks this business faces. For example - HELLA GmbH KGaA has 1 warning sign we think you should be aware of.

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.