Be Sure To Check Out FORTEC Elektronik AG (ETR:FEV) Before It Goes Ex-Dividend

Readers hoping to buy FORTEC Elektronik AG (ETR:FEV) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. In other words, investors can purchase FORTEC Elektronik's shares before the 8th of February in order to be eligible for the dividend, which will be paid on the 12th of February.

The company's next dividend payment will be €0.85 per share, and in the last 12 months, the company paid a total of €0.85 per share. Last year's total dividend payments show that FORTEC Elektronik has a trailing yield of 3.3% on the current share price of €25.80. If you buy this business for its dividend, you should have an idea of whether FORTEC Elektronik's dividend is reliable and sustainable. So we need to investigate whether FORTEC Elektronik can afford its dividend, and if the dividend could grow.

Check out our latest analysis for FORTEC Elektronik

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. Fortunately FORTEC Elektronik's payout ratio is modest, at just 34% of profit. A useful secondary check can be to evaluate whether FORTEC Elektronik generated enough free cash flow to afford its dividend. Dividends consumed 51% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

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 FORTEC Elektronik paid out over the last 12 months.

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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see FORTEC Elektronik's earnings per share have risen 13% per annum over the last five years. FORTEC Elektronik is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. This is a reasonable combination that could hint at some further dividend increases in the future.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, FORTEC Elektronik has lifted its dividend by approximately 5.4% a year on average. Earnings per share have been growing much quicker than dividends, potentially because FORTEC Elektronik is keeping back more of its profits to grow the business.

The Bottom Line

Has FORTEC Elektronik got what it takes to maintain its dividend payments? Earnings per share have grown at a nice rate in recent times and over the last year, FORTEC Elektronik paid out less than half its earnings and a bit over half its free cash flow. It's a promising combination that should mark this company worthy of closer attention.

While it's tempting to invest in FORTEC Elektronik for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 1 warning sign for FORTEC Elektronik and you should be aware of this before buying any shares.

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.