Should You Buy technotrans SE (ETR:TTR1) For Its Upcoming Dividend?

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see technotrans SE (ETR:TTR1) is about to trade ex-dividend in the next three 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 because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. In other words, investors can purchase technotrans' shares before the 19th of May in order to be eligible for the dividend, which will be paid on the 21st of May.

The company's next dividend payment will be €0.53 per share, and in the last 12 months, the company paid a total of €0.53 per share. Looking at the last 12 months of distributions, technotrans has a trailing yield of approximately 2.5% on its current stock price of €20.90. If you buy this business for its dividend, you should have an idea of whether technotrans's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

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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. Fortunately technotrans's payout ratio is modest, at just 39% of profit. A useful secondary check can be to evaluate whether technotrans generated enough free cash flow to afford its dividend. Over the last year it paid out 75% 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 technotrans

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

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. For this reason, we're glad to see technotrans's earnings per share have risen 10% per annum over the last five years. technotrans is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. This is a reasonable combination that could hint at some further dividend increases in the future.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, technotrans has increased its dividend at approximately 4.9% a year on average. Earnings per share have been growing much quicker than dividends, potentially because technotrans is keeping back more of its profits to grow the business.

To Sum It Up

Is technotrans worth buying for its dividend? Earnings per share have grown at a nice rate in recent times and over the last year, technotrans paid out less than half its earnings and a bit over half its free cash flow. It's a promising combination that should mark this company worthy of closer attention.

On that note, you'll want to research what risks technotrans is facing. To help with this, we've discovered 1 warning sign for technotrans that you should be aware of before investing in their shares.

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.