Fresenius SE & Co. KGaA (ETR:FRE) Is About To Go Ex-Dividend, And It Pays A 2.3% Yield

Fresenius SE & Co. KGaA (ETR:FRE) is about to trade ex-dividend in the next 3 days. The ex-dividend date is usually set to be two business days 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 of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. This means that investors who purchase Fresenius SE KGaA's shares on or after the 26th of May will not receive the dividend, which will be paid on the 28th of May.

The company's next dividend payment will be €1.00 per share, on the back of last year when the company paid a total of €1.00 to shareholders. Calculating the last year's worth of payments shows that Fresenius SE KGaA has a trailing yield of 2.3% on the current share price of €43.52. 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.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Fresenius SE KGaA paying out a modest 47% of its earnings. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. The good news is it paid out just 6.0% of its free cash flow in the last year.

It's positive to see that Fresenius SE KGaA's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

See our latest analysis for Fresenius SE KGaA

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

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fresenius SE KGaA's earnings per share have fallen at approximately 8.9% a year over the previous five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Fresenius SE KGaA has delivered 8.6% dividend growth per year on average over the past 10 years.

The Bottom Line

Has Fresenius SE KGaA got what it takes to maintain its dividend payments? Fresenius SE KGaA has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. In summary, it's hard to get excited about Fresenius SE KGaA from a dividend perspective.

So while Fresenius SE KGaA looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Every company has risks, and we've spotted 2 warning signs for Fresenius SE KGaA you should know about.

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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.