Here's Why We're Wary Of Buying Berliner Effektengesellschaft's (FRA:BFV) For Its Upcoming Dividend

It looks like Berliner Effektengesellschaft AG (FRA:BFV) is about to go ex-dividend in the next three days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Meaning, you will need to purchase Berliner Effektengesellschaft's shares before the 17th of June to receive the dividend, which will be paid on the 19th of June.

The company's next dividend payment will be €0.50 per share, on the back of last year when the company paid a total of €0.50 to shareholders. Calculating the last year's worth of payments shows that Berliner Effektengesellschaft has a trailing yield of 0.8% on the current share price of €64.00. If you buy this business for its dividend, you should have an idea of whether Berliner Effektengesellschaft's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Berliner Effektengesellschaft

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. Berliner Effektengesellschaft is paying out an acceptable 51% of its profit, a common payout level among most companies.

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 how much of its profit Berliner Effektengesellschaft paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're not enthused to see that Berliner Effektengesellschaft's earnings per share have remained effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Berliner Effektengesellschaft has lifted its dividend by approximately 26% a year on average.

Final Takeaway

Should investors buy Berliner Effektengesellschaft for the upcoming dividend? Berliner Effektengesellschaft's earnings per share have been essentially flat, and the company is paying out more than half of its earnings as dividends to shareholders. All things considered, we're not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.

Although, if you're still interested in Berliner Effektengesellschaft and want to know more, you'll find it very useful to know what risks this stock faces. In terms of investment risks, we've identified 1 warning sign with Berliner Effektengesellschaft and understanding them should be part of your investment process.

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.