Three Days Left Until Vossloh AG (ETR:VOS) Trades Ex-Dividend

Readers hoping to buy Vossloh AG (ETR:VOS) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, Vossloh investors that purchase the stock on or after the 25th of May will not receive the dividend, which will be paid on the 30th of May.

The company's next dividend payment will be €1.00 per share. Last year, in total, the company distributed €1.00 to shareholders. Looking at the last 12 months of distributions, Vossloh has a trailing yield of approximately 2.4% on its current stock price of €41.6. 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! So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Vossloh

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 Vossloh paying out a modest 41% of its earnings. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Dividends consumed 66% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

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.

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. 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 encouraged by the steady growth at Vossloh, with earnings per share up 6.3% on average over the last five years. Decent historical earnings per share growth suggests Vossloh has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Vossloh has seen its dividend decline 8.8% per annum on average over the past 10 years, which is not great to see. Vossloh is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

Final Takeaway

Has Vossloh got what it takes to maintain its dividend payments? Earnings per share have been growing at a steady rate, and Vossloh paid out less than half its profits and more than half its free cash flow as dividends over the last year. Overall, it's hard to get excited about Vossloh from a dividend perspective.

While it's tempting to invest in Vossloh for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 2 warning signs for Vossloh you should know about.

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.