Knorr-Bremse Aktiengesellschaft (ETR:KBX) Stock Goes Ex-Dividend In Just Three Days

Knorr-Bremse Aktiengesellschaft (ETR:KBX) is about to trade ex-dividend in the next 3 days. 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. This means that investors who purchase Knorr-Bremse's shares on or after the 21st of May will not receive the dividend, which will be paid on the 26th of May.

The company's next dividend payment will be €1.52 per share, and in the last 12 months, the company paid a total of €1.52 per share. Calculating the last year's worth of payments shows that Knorr-Bremse has a trailing yield of 1.5% on the current share price of €103.7. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Knorr-Bremse has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Knorr-Bremse

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Fortunately Knorr-Bremse's payout ratio is modest, at just 46% of profit. 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. It distributed 41% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that Knorr-Bremse's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

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

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. With that in mind, we're not enthused to see that Knorr-Bremse's earnings per share have remained effectively flat over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Knorr-Bremse has seen its dividend decline 6.8% per annum on average over the past two years, which is not great to see.

Final Takeaway

From a dividend perspective, should investors buy or avoid Knorr-Bremse? Earnings per share have been flat, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend gets cut. To summarise, Knorr-Bremse looks okay on this analysis, although it doesn't appear a stand-out opportunity.

While it's tempting to invest in Knorr-Bremse for the dividends alone, you should always be mindful of the risks involved. To help with this, we've discovered 2 warning signs for Knorr-Bremse that you should be aware of before investing in their shares.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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