Should Income Investors Look At Geratherm Medical AG (ETR:GME) Before Its Ex-Dividend?

Geratherm Medical AG (ETR:GME) stock is about to trade ex-dividend in three days. 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. 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. This means that investors who purchase Geratherm Medical's shares on or after the 19th of August will not receive the dividend, which will be paid on the 21st of August.

The company's next dividend payment will be €0.10 per share, and in the last 12 months, the company paid a total of €0.15 per share. Based on the last year's worth of payments, Geratherm Medical has a trailing yield of 2.7% on the current stock price of €3.76. 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! As a result, readers should always check whether Geratherm Medical has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Geratherm Medical

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. Geratherm Medical paid out a comfortable 49% of its profit last year. A useful secondary check can be to evaluate whether Geratherm Medical generated enough free cash flow to afford its dividend.

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

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. 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 Geratherm Medical'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.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Geratherm Medical has seen its dividend decline 8.4% per annum on average over the past 10 years, which is not great to see.

To Sum It Up

From a dividend perspective, should investors buy or avoid Geratherm Medical? Earnings per share have been effectively flat over this time, and Geratherm Medical's paying out less than half its profits and -475% of its cash flow. It's not common to see a company paying out a limited amount of its profits yet a substantially higher percentage of its cash flow, so we'd flag this as a concern. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

So if you want to do more digging on Geratherm Medical, you'll find it worthwhile knowing the risks that this stock faces. For example - Geratherm Medical 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.