Is It Worth Considering DWS Group GmbH & Co. KGaA (ETR:DWS) For Its Upcoming Dividend?

Readers hoping to buy DWS Group GmbH & Co. KGaA (ETR:DWS) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, DWS Group GmbH KGaA investors that purchase the stock on or after the 7th of June will not receive the dividend, which will be paid on the 11th of June.

The company's next dividend payment will be €6.10 per share, on the back of last year when the company paid a total of €2.10 to shareholders. Based on the last year's worth of payments, DWS Group GmbH KGaA stock has a trailing yield of around 4.9% on the current share price of €42.66. If you buy this business for its dividend, you should have an idea of whether DWS Group GmbH KGaA's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for DWS Group GmbH KGaA

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Its dividend payout ratio is 76% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. It could become a concern if earnings started to decline.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

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

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. This is why it's a relief to see DWS Group GmbH KGaA earnings per share are up 7.4% per annum over the last five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. DWS Group GmbH KGaA has delivered an average of 8.9% per year annual increase in its dividend, based on the past five years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

To Sum It Up

Has DWS Group GmbH KGaA got what it takes to maintain its dividend payments? Earnings per share have been growing at a reasonable rate, and the company is paying out a bit over half its earnings as dividends. At best we would put it on a watch-list to see if business conditions improve, as it doesn't look like a clear opportunity right now.

So if you want to do more digging on DWS Group GmbH KGaA, you'll find it worthwhile knowing the risks that this stock faces. In terms of investment risks, we've identified 1 warning sign with DWS Group GmbH KGaA and understanding them 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.