CeoTronics AG (FRA:CEK) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

Readers hoping to buy CeoTronics AG (FRA:CEK) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Accordingly, CeoTronics investors that purchase the stock on or after the 10th of November will not receive the dividend, which will be paid on the 12th of November.

The company's next dividend payment will be €0.20 per share. Last year, in total, the company distributed €0.20 to shareholders. Based on the last year's worth of payments, CeoTronics stock has a trailing yield of around 1.4% on the current share price of €14.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

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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 CeoTronics's payout ratio is modest, at just 34% of profit. A useful secondary check can be to evaluate whether CeoTronics generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 8.6% of its cash flow last year.

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.

View our latest analysis for CeoTronics

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 fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see CeoTronics's earnings per share have risen 19% per annum over the last five years. Earnings per share are growing rapidly and the company is keeping more than half of its earnings within the business; an attractive combination which could suggest the company is focused on reinvesting to grow earnings further. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last eight years, CeoTronics has lifted its dividend by approximately 19% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

Final Takeaway

Has CeoTronics got what it takes to maintain its dividend payments? It's great that CeoTronics is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. There's a lot to like about CeoTronics, and we would prioritise taking a closer look at it.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Every company has risks, and we've spotted 1 warning sign for CeoTronics you should know about.

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