Don't Race Out To Buy Bijou Brigitte modische Accessoires Aktiengesellschaft (ETR:BIJ) Just Because It's Going Ex-Dividend

Bijou Brigitte modische Accessoires Aktiengesellschaft (ETR:BIJ) stock is about to trade ex-dividend in 4 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. In other words, investors can purchase Bijou Brigitte modische Accessoires' shares before the 28th of June in order to be eligible for the dividend, which will be paid on the 2nd of July.

The company's next dividend payment will be €3.50 per share, and in the last 12 months, the company paid a total of €3.50 per share. Calculating the last year's worth of payments shows that Bijou Brigitte modische Accessoires has a trailing yield of 8.6% on the current share price of €40.75. 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! We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Bijou Brigitte modische Accessoires

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. Bijou Brigitte modische Accessoires distributed an unsustainably high 112% of its profit as dividends to shareholders last year. Without more sustainable payment behaviour, the dividend looks precarious. A useful secondary check can be to evaluate whether Bijou Brigitte modische Accessoires generated enough free cash flow to afford its dividend. Over the last year it paid out 64% of its free cash flow as dividends, within the usual range for most companies.

It's disappointing to see that the dividend was not covered by profits, but cash is more important from a dividend sustainability perspective, and Bijou Brigitte modische Accessoires fortunately did generate enough cash to fund its dividend. If executives were to continue paying more in dividends than the company reported in profits, we'd view this as a warning sign. Extraordinarily few companies are capable of persistently paying a dividend that is greater than their profits.

Click here to see how much of its profit Bijou Brigitte modische Accessoires paid out over the last 12 months.

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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see Bijou Brigitte modische Accessoires earnings per share are up 2.7% per annum over the last five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Bijou Brigitte modische Accessoires's dividend payments are effectively flat on where they were 10 years ago.

The Bottom Line

Should investors buy Bijou Brigitte modische Accessoires for the upcoming dividend? While earnings per share have been growing slowly, Bijou Brigitte modische Accessoires is paying out an uncomfortably high percentage of its earnings. However it did pay out a lower percentage of its cashflow. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of Bijou Brigitte modische Accessoires.

With that in mind though, if the poor dividend characteristics of Bijou Brigitte modische Accessoires don't faze you, it's worth being mindful of the risks involved with this business. For example - Bijou Brigitte modische Accessoires has 2 warning signs we think you should be aware of.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com