Vossloh (ETR:VOS) Could Be A Buy For Its Upcoming 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 is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled 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. In other words, investors can purchase Vossloh's shares before the 20th of May in order to be eligible for the dividend, which will be paid on the 24th of May.

The company's upcoming dividend is €1.00 a share, following on from the last 12 months, when the company distributed a total of €1.00 per share to shareholders. Calculating the last year's worth of payments shows that Vossloh has a trailing yield of 2.3% on the current share price of €43.15. If you buy this business for its dividend, you should have an idea of whether Vossloh's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for Vossloh

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Vossloh paid out 60% of its earnings to investors last year, a normal payout level for most businesses.

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

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see Vossloh's earnings have been skyrocketing, up 21% per annum for the past five years. The current payout ratio suggests a good balance between rewarding shareholders with dividends, and reinvesting in growth. With a reasonable payout ratio, profits being reinvested, and some earnings growth, Vossloh could have strong prospects for future increases to the dividend.

We'd also point out that Vossloh issued a meaningful number of new shares in the past year. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.

Another key way to measure a company's dividend prospects is by measuring its 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

From a dividend perspective, should investors buy or avoid Vossloh? Earnings per share are growing at an attractive rate, and Vossloh is paying out a bit over half its profits. Vossloh ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.

On that note, you'll want to research what risks Vossloh is facing. Our analysis shows 2 warning signs for Vossloh that we strongly recommend you have a look at before investing in the company.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising 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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