Income Investors Should Know That Ströer SE & Co. KGaA (ETR:SAX) Goes Ex-Dividend Soon

Ströer SE & Co. KGaA (ETR:SAX) 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. This means that investors who purchase Ströer SE KGaA's shares on or after the 5th of June will not receive the dividend, which will be paid on the 9th of June.

The company's next dividend payment will be €2.30 per share, and in the last 12 months, the company paid a total of €1.85 per share. Last year's total dividend payments show that Ströer SE KGaA has a trailing yield of 3.6% on the current share price of €51.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

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. Last year, Ströer SE KGaA paid out 96% of its income as dividends, which is above a level that we're comfortable with, especially if the company needs to reinvest in its business. 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. It distributed 34% of its free cash flow as dividends, a comfortable payout level for most companies.

It's good to see that while Ströer SE KGaA's dividends were not well covered by profits, at least they are affordable from a cash perspective. Still, if the company continues paying out such a high percentage of its profits, the dividend could be at risk if business turns sour.

View our latest analysis for Ströer SE KGaA

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

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Ströer SE KGaA earnings per share are up 7.5% per annum over the last five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Ströer SE KGaA has lifted its dividend by approximately 17% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

Final Takeaway

Should investors buy Ströer SE KGaA for the upcoming dividend? Ströer SE KGaA has been steadily growing its earnings per share, and it is paying out just 34% of its cash flow but an uncomfortably high 96% of its income. Overall, it's hard to get excited about Ströer SE KGaA from a dividend perspective.

However if you're still interested in Ströer SE KGaA as a potential investment, you should definitely consider some of the risks involved with Ströer SE KGaA. For example, we've found 2 warning signs for Ströer SE KGaA that we recommend you consider before investing in the business.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.