Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that CEWE Stiftung & Co. KGaA (ETR:CWC) is about to go ex-dividend in just 3 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. In other words, investors can purchase CEWE Stiftung KGaA's shares before the 10th of June in order to be eligible for the dividend, which will be paid on the 14th of June.
The company's next dividend payment will be €2.30 per share, and in the last 12 months, the company paid a total of €2.30 per share. Calculating the last year's worth of payments shows that CEWE Stiftung KGaA has a trailing yield of 1.7% on the current share price of €132. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether CEWE Stiftung KGaA can afford its dividend, and if the dividend could grow.
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. That's why it's good to see CEWE Stiftung KGaA paying out a modest 30% 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. It paid out 14% of its free cash flow as dividends last year, which is conservatively low.
It's positive to see that CEWE Stiftung KGaA'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.
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, CEWE Stiftung KGaA's earnings per share have been growing at 20% a year for the past five years. Earnings per share are growing rapidly and the company is keeping more than half of its earnings within the business; an attractive combination which could suggest the company is focused on reinvesting to grow earnings further. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. CEWE Stiftung KGaA has delivered 6.3% dividend growth per year on average over the past 10 years. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
Should investors buy CEWE Stiftung KGaA for the upcoming dividend? CEWE Stiftung KGaA has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. CEWE Stiftung KGaA looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
Curious what other investors think of CEWE Stiftung KGaA? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.
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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