DEFAMA Deutsche Fachmarkt AG (ETR:DEF) Looks Interesting, And It's About To Pay A Dividend

It looks like DEFAMA Deutsche Fachmarkt AG (ETR:DEF) is about to go ex-dividend in the next four days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a 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 DEFAMA Deutsche Fachmarkt's shares on or after the 24th of July will not receive the dividend, which will be paid on the 26th of July.

The upcoming dividend for DEFAMA Deutsche Fachmarkt will put a total of €0.54 per share in shareholders' pockets, up from last year's total dividends of €0.51. 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 DEFAMA Deutsche Fachmarkt has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for DEFAMA Deutsche Fachmarkt

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately DEFAMA Deutsche Fachmarkt's payout ratio is modest, at just 45% of profit.

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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, it's good to see earnings have grown 16% on last year.

One year is a very short time frame in the pantheon of investing, so we wouldn't get too hung up on these numbers.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last five years, DEFAMA Deutsche Fachmarkt has lifted its dividend by approximately 9.7% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

Has DEFAMA Deutsche Fachmarkt got what it takes to maintain its dividend payments? We love that DEFAMA Deutsche Fachmarkt is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. It's a promising combination that should mark this company worthy of closer attention.

So while DEFAMA Deutsche Fachmarkt looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Every company has risks, and we've spotted 5 warning signs for DEFAMA Deutsche Fachmarkt (of which 1 doesn't sit too well with us!) 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.