Three Days Left Until H&R GmbH & Co. KGaA (ETR:2HRA) Trades Ex-Dividend

It looks like H&R GmbH & Co. KGaA (ETR:2HRA) is about to go ex-dividend in the next three days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. Thus, you can purchase H&R GmbH KGaA's shares before the 29th of May in order to receive the dividend, which the company will pay on the 31st of May.

The company's next dividend payment will be €0.10 per share. Last year, in total, the company distributed €0.10 to shareholders. Based on the last year's worth of payments, H&R GmbH KGaA stock has a trailing yield of around 2.0% on the current share price of €5.04. If you buy this business for its dividend, you should have an idea of whether H&R GmbH KGaA's dividend is reliable and sustainable. So we need to investigate whether H&R GmbH KGaA can afford its dividend, and if the dividend could grow.

Check out our latest analysis for H&R GmbH KGaA

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. H&R GmbH KGaA paid out a comfortable 30% of its profit last year. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Luckily it paid out just 13% of its free cash flow last year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see how much of its profit H&R GmbH KGaA paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. H&R GmbH KGaA's earnings per share have fallen at approximately 9.8% a year over the previous five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. H&R GmbH KGaA has seen its dividend decline 21% per annum on average over the past six years, which is not great to see. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.

The Bottom Line

Should investors buy H&R GmbH KGaA for the upcoming dividend? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Every company has risks, and we've spotted 2 warning signs for H&R GmbH KGaA you should know about.

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.