There's A Lot To Like About Turbon's (FRA:TUR) Upcoming €0.20 Dividend

Turbon AG (FRA:TUR) stock is about to trade ex-dividend in three days. 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 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. Therefore, if you purchase Turbon's shares on or after the 21st of August, you won't be eligible to receive the dividend, when it is paid on the 23rd of August.

The company's next dividend payment will be €0.20 per share, on the back of last year when the company paid a total of €0.20 to shareholders. Based on the last year's worth of payments, Turbon stock has a trailing yield of around 4.8% on the current share price of €4.2. If you buy this business for its dividend, you should have an idea of whether Turbon's dividend is reliable and sustainable. So we need to investigate whether Turbon can afford its dividend, and if the dividend could grow.

View our latest analysis for Turbon

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Turbon has a low and conservative payout ratio of just 8.5% of its income after tax.

Click here to see how much of its profit Turbon paid out over the last 12 months.

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Turbon has grown its earnings rapidly, up 43% a year for the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Turbon has seen its dividend decline 10% per annum on average over the past 10 years, which is not great to see. Turbon 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.

The Bottom Line

From a dividend perspective, should investors buy or avoid Turbon? Companies like Turbon that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. Turbon 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.

In light of that, while Turbon has an appealing dividend, it's worth knowing the risks involved with this stock. We've identified 4 warning signs with Turbon (at least 1 which is significant), and understanding these should be part of your investment process.

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.