FCR Immobilien (ETR:FC9) Could Be A Buy For Its Upcoming Dividend

It looks like FCR Immobilien AG (ETR:FC9) is about to go ex-dividend in the next three 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Thus, you can purchase FCR Immobilien's shares before the 25th of June in order to receive the dividend, which the company will pay on the 27th of June.

The company's upcoming dividend is €0.25 a share, following on from the last 12 months, when the company distributed a total of €0.25 per share to shareholders. Last year's total dividend payments show that FCR Immobilien has a trailing yield of 2.6% on the current share price of €9.80. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether FCR Immobilien can afford its dividend, and if the dividend could grow.

See our latest analysis for FCR Immobilien

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. Fortunately FCR Immobilien's payout ratio is modest, at just 28% of profit. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out 8.9% of its free cash flow as dividends last year, which is conservatively low.

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 FCR Immobilien paid out over the last 12 months.

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. If earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see FCR Immobilien earnings per share are up 4.7% per annum over the last five years. Recent growth has not been impressive. Yet there are several ways to grow the dividend, and one of them is simply that the company may choose to pay out more of its earnings as dividends.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. FCR Immobilien has delivered an average of 7.4% per year annual increase in its dividend, based on the past five years of dividend payments. 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.

To Sum It Up

From a dividend perspective, should investors buy or avoid FCR Immobilien? Earnings per share have been growing moderately, and FCR Immobilien is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and FCR Immobilien is halfway there. FCR Immobilien looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

While it's tempting to invest in FCR Immobilien for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 4 warning signs for FCR Immobilien (of which 1 shouldn't be ignored!) 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.

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