Be Sure To Check Out HMS Bergbau AG (ETR:HMU) Before It Goes Ex-Dividend

Readers hoping to buy HMS Bergbau AG (ETR:HMU) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day 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 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 HMS Bergbau's shares before the 30th of August in order to be eligible for the dividend, which will be paid on the 1st of September.

The company's next dividend payment will be €0.77 per share, which looks like a nice increase on last year, when the company distributed a total of €0.04 to shareholders. If you buy this business for its dividend, you should have an idea of whether HMS Bergbau's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for HMS Bergbau

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. That's why it's good to see HMS Bergbau paying out a modest 34% of its earnings. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend.

Click here to see how much of its profit HMS Bergbau 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. That's why it's comforting to see HMS Bergbau's earnings have been skyrocketing, up 68% per annum for the past five years.

Given that HMS Bergbau has only been paying a dividend for a year, there's not much of a past history to draw insight from.

Final Takeaway

Should investors buy HMS Bergbau for the upcoming dividend? We like that HMS Bergbau has been successfully growing its earnings per share at a nice rate and reinvesting most of its profits in the business. However, we note the high cashflow payout ratio with some concern. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.

While it's tempting to invest in HMS Bergbau for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 2 warning signs for HMS Bergbau that we strongly recommend you have a look at before investing in the company.

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.