There's A Lot To Like About Mercedes-Benz Group's (ETR:MBG) Upcoming €4.30 Dividend

It looks like Mercedes-Benz Group AG (ETR:MBG) is about to go ex-dividend in the next 2 days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important as the process of settlement involves at least 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 Mercedes-Benz Group's shares before the 8th of May in order to be eligible for the dividend, which will be paid on the 12th of May.

The company's next dividend payment will be €4.30 per share, and in the last 12 months, the company paid a total of €4.30 per share. Looking at the last 12 months of distributions, Mercedes-Benz Group has a trailing yield of approximately 8.1% on its current stock price of €53.30. If you buy this business for its dividend, you should have an idea of whether Mercedes-Benz Group's dividend is reliable and sustainable. So we need to investigate whether Mercedes-Benz Group 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. Mercedes-Benz Group paid out a comfortable 47% of its profit last year. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Dividends consumed 53% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

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 Mercedes-Benz Group

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

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Mercedes-Benz Group has grown its earnings rapidly, up 33% a year for the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Mercedes-Benz Group has increased its dividend at approximately 5.8% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Mercedes-Benz Group is keeping back more of its profits to grow the business.

Final Takeaway

Is Mercedes-Benz Group worth buying for its dividend? Earnings per share have grown at a nice rate in recent times and over the last year, Mercedes-Benz Group paid out less than half its earnings and a bit over half its free cash flow. Mercedes-Benz Group looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

On that note, you'll want to research what risks Mercedes-Benz Group is facing. To that end, you should learn about the 2 warning signs we've spotted with Mercedes-Benz Group (including 1 which is a bit unpleasant).

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.