Is It Smart To Buy GBK Beteiligungen AG (BST:GBQ) Before It Goes Ex-Dividend?

Readers hoping to buy GBK Beteiligungen AG (BST:GBQ) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. Therefore, if you purchase GBK Beteiligungen's shares on or after the 3rd of June, you won't be eligible to receive the dividend, when it is paid on the 5th of June.

The company's next dividend payment will be €0.25 per share, on the back of last year when the company paid a total of €0.25 to shareholders. Last year's total dividend payments show that GBK Beteiligungen has a trailing yield of 5.5% on the current share price of €4.56. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether GBK Beteiligungen can afford its dividend, and if the dividend could grow.

Check out our latest analysis for GBK Beteiligungen

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 GBK Beteiligungen paying out a modest 48% of its earnings.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

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

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see GBK Beteiligungen's earnings have been skyrocketing, up 24% per annum for the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. GBK Beteiligungen's dividend payments per share have declined at 3.6% per year on average over the past five years, which is uninspiring. GBK Beteiligungen 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.

To Sum It Up

Has GBK Beteiligungen got what it takes to maintain its dividend payments? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. GBK Beteiligungen 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 GBK Beteiligungen is facing. Every company has risks, and we've spotted 5 warning signs for GBK Beteiligungen you should know about.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.