Should You Buy TAG Immobilien AG (ETR:TEG) For Its Upcoming Dividend?

By
Simply Wall St
Published
May 12, 2022
XTRA:TEG
Source: Shutterstock

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 TAG Immobilien AG (ETR:TEG) 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. In other words, investors can purchase TAG Immobilien's shares before the 16th of May in order to be eligible for the dividend, which will be paid on the 18th of May.

The company's upcoming dividend is €0.93 a share, following on from the last 12 months, when the company distributed a total of €0.93 per share to shareholders. Based on the last year's worth of payments, TAG Immobilien stock has a trailing yield of around 4.9% on the current share price of €19.12. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for TAG 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. TAG Immobilien paid out just 24% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether TAG Immobilien generated enough free cash flow to afford its dividend. It paid out 79% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.

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 the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
XTRA:TEG Historic Dividend May 12th 2022

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. 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 TAG Immobilien has grown its earnings rapidly, up 21% a year for the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. TAG Immobilien has delivered 17% dividend growth per year on average over the past 10 years. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

To Sum It Up

Is TAG Immobilien worth buying for its dividend? 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. TAG Immobilien looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

On that note, you'll want to research what risks TAG Immobilien is facing. Be aware that TAG Immobilien is showing 3 warning signs in our investment analysis, and 2 of those are significant...

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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