Be Sure To Check Out Merkur PrivatBank KgaA (ETR:MBK) Before It Goes Ex-Dividend

Readers hoping to buy Merkur PrivatBank KgaA (ETR:MBK) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date occurs one day 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Therefore, if you purchase Merkur PrivatBank KgaA's shares on or after the 23rd of June, you won't be eligible to receive the dividend, when it is paid on the 27th of June.

The company's next dividend payment will be €0.45 per share. Last year, in total, the company distributed €0.45 to shareholders. Based on the last year's worth of payments, Merkur PrivatBank KgaA has a trailing yield of 2.9% on the current stock price of €15.6. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Merkur PrivatBank KgaA

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Fortunately Merkur PrivatBank KgaA's payout ratio is modest, at just 38% of profit.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

Click here to see how much of its profit Merkur PrivatBank KgaA 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 earnings fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see Merkur PrivatBank KgaA's earnings per share have risen 16% per annum over the last five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Merkur PrivatBank KgaA has delivered 1.2% dividend growth per year on average over the past 10 years. Earnings per share have been growing much quicker than dividends, potentially because Merkur PrivatBank KgaA is keeping back more of its profits to grow the business.

To Sum It Up

Is Merkur PrivatBank KgaA worth buying for its dividend? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. Merkur PrivatBank KgaA ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.

While it's tempting to invest in Merkur PrivatBank KgaA for the dividends alone, you should always be mindful of the risks involved. For example - Merkur PrivatBank KgaA has 1 warning sign we think you should be aware of.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.