Bastei Lübbe (ETR:BST) Could Be A Buy For Its Upcoming Dividend

Readers hoping to buy Bastei Lübbe AG (ETR:BST) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. 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. In other words, investors can purchase Bastei Lübbe's shares before the 14th of September in order to be eligible for the dividend, which will be paid on the 18th of September.

The company's next dividend payment will be €0.16 per share. Last year, in total, the company distributed €0.16 to shareholders. Looking at the last 12 months of distributions, Bastei Lübbe has a trailing yield of approximately 3.2% on its current stock price of €5. If you buy this business for its dividend, you should have an idea of whether Bastei Lübbe's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Bastei Lübbe

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. That's why it's good to see Bastei Lübbe paying out a modest 41% of its earnings. 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. Dividends consumed 55% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's positive to see that Bastei Lübbe'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.

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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see Bastei Lübbe's earnings have been skyrocketing, up 49% per annum for the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Bastei Lübbe has seen its dividend decline 6.0% per annum on average over the past nine years, which is not great to see. Bastei Lübbe is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

Final Takeaway

From a dividend perspective, should investors buy or avoid Bastei Lübbe? From a dividend perspective, we're encouraged to see that earnings per share have been growing, the company is paying out less than half of its earnings, and a bit over half its free cash flow. There's a lot to like about Bastei Lübbe, and we would prioritise taking a closer look at it.

While it's tempting to invest in Bastei Lübbe for the dividends alone, you should always be mindful of the risks involved. For example - Bastei Lübbe has 3 warning signs we think you should be aware of.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.