We Wouldn't Be Too Quick To Buy UmweltBank AG (ETR:UBK) Before It Goes Ex-Dividend

Readers hoping to buy UmweltBank AG (ETR:UBK) 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. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Therefore, if you purchase UmweltBank's shares on or after the 24th of June, you won't be eligible to receive the dividend, when it is paid on the 27th of July.

The company's upcoming dividend is €0.33 a share, following on from the last 12 months, when the company distributed a total of €0.33 per share to shareholders. Based on the last year's worth of payments, UmweltBank has a trailing yield of 1.9% on the current stock price of €17.05. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for UmweltBank

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. UmweltBank paid out more than half (60%) of its earnings last year, which is a regular payout ratio for most companies.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

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

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That explains why we're not overly excited about UmweltBank's flat earnings over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, six years ago, UmweltBank has lifted its dividend by approximately 2.8% a year on average.

The Bottom Line

Is UmweltBank worth buying for its dividend? Earnings per share have not grown at all, and the company pays out a bit over half its profits to shareholders. UmweltBank doesn't appear to have a lot going for it, and we're not inclined to take a risk on owning it for the dividend.

With that in mind though, if the poor dividend characteristics of UmweltBank don't faze you, it's worth being mindful of the risks involved with this business. Every company has risks, and we've spotted 2 warning signs for UmweltBank you should know about.

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.