HMS Bergbau AG (ETR:HMU) Passed Our Checks, And It's About To Pay A €1.05 Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see HMS Bergbau AG (ETR:HMU) is about to trade ex-dividend in the next four days. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. 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 HMS Bergbau's shares before the 15th of August in order to be eligible for the dividend, which will be paid on the 1st of October.

The company's upcoming dividend is €1.05 a share, following on from the last 12 months, when the company distributed a total of €1.05 per share to shareholders. Calculating the last year's worth of payments shows that HMS Bergbau has a trailing yield of 2.7% on the current share price of €38.80. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

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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. HMS Bergbau paid out a comfortable 36% of its profit last year. 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. Over the last year it paid out 53% of its free cash flow as dividends, within the usual range for most companies.

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 HMS Bergbau

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 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 HMS Bergbau has grown its earnings rapidly, up 92% a year for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, three years ago, HMS Bergbau has lifted its dividend by approximately 197% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

Final Takeaway

Should investors buy HMS Bergbau for the upcoming dividend? Earnings per share have grown at a nice rate in recent times and over the last year, HMS Bergbau paid out less than half its earnings and a bit over half its free cash flow. There's a lot to like about HMS Bergbau, and we would prioritise taking a closer look at it.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example, we've found 2 warning signs for HMS Bergbau that we recommend you consider before investing in the business.

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.