Income Investors Should Know That Bastei Lübbe AG (ETR:BST) Goes Ex-Dividend Soon

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Bastei Lübbe AG (ETR:BST) is about to go ex-dividend in just three days. The ex-dividend date is usually set to be one business day 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 important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. In other words, investors can purchase Bastei Lübbe's shares before the 12th of September in order to be eligible for the dividend, which will be paid on the 16th of September.

The company's next dividend payment will be €0.30 per share, on the back of last year when the company paid a total of €0.30 to shareholders. Calculating the last year's worth of payments shows that Bastei Lübbe has a trailing yield of 3.1% on the current share price of €9.60. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Bastei Lübbe has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Bastei Lübbe

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Bastei Lübbe paid out a comfortable 40% of its profit last year. A useful secondary check can be to evaluate whether Bastei Lübbe generated enough free cash flow to afford its dividend. It paid out 92% of its free cash flow in the form of dividends last year, which is outside the comfort zone for most businesses. Companies usually need cash more than they need earnings - expenses don't pay themselves - so it's not great to see it paying out so much of its cash flow.

While Bastei Lübbe's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Were this to happen repeatedly, this would be a risk to Bastei Lübbe's ability to maintain its dividend.

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

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Bastei Lübbe has grown its earnings rapidly, up 75% a year for the past five years. Earnings have been growing quickly, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

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, Bastei Lübbe has lifted its dividend by approximately 0.7% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Bastei Lübbe is keeping back more of its profits to grow the business.

The Bottom Line

Has Bastei Lübbe got what it takes to maintain its dividend payments? We like that Bastei Lübbe has been successfully growing its earnings per share at a nice rate and reinvesting most of its profits in the business. However, we note the high cashflow payout ratio with some concern. All things considered, we are not particularly enthused about Bastei Lübbe from a dividend perspective.

On that note, you'll want to research what risks Bastei Lübbe is facing. To that end, you should learn about the 2 warning signs we've spotted with Bastei Lübbe (including 1 which is a bit unpleasant).

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.