GEA Group Aktiengesellschaft (ETR:G1A) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that GEA Group Aktiengesellschaft (ETR:G1A) is about to go ex-dividend in just four 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. 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 GEA Group's shares on or after the 2nd of May, you won't be eligible to receive the dividend, when it is paid on the 6th of May.

The company's next dividend payment will be €1.15 per share, on the back of last year when the company paid a total of €1.15 to shareholders. Last year's total dividend payments show that GEA Group has a trailing yield of 2.1% on the current share price of €55.75. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.

We check all companies for important risks. See what we found for GEA Group in our free report.

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That's why it's good to see GEA Group paying out a modest 48% of its earnings. A useful secondary check can be to evaluate whether GEA Group generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 36% of the free cash flow it generated, which is a comfortable payout ratio.

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.

View our latest analysis for GEA Group

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

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. 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's why it's comforting to see GEA Group's earnings have been skyrocketing, up 45% per annum for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

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, 10 years ago, GEA Group has lifted its dividend by approximately 5.1% a year on average. Earnings per share have been growing much quicker than dividends, potentially because GEA Group is keeping back more of its profits to grow the business.

Final Takeaway

Should investors buy GEA Group for the upcoming dividend? We love that GEA Group is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. Overall we think this is an attractive combination and worthy of further research.

Ever wonder what the future holds for GEA Group? See what the 13 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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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.