Four Days Left Until Deutsche Lufthansa AG (ETR:LHA) Trades Ex-Dividend

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 Deutsche Lufthansa AG (ETR:LHA) is about to go ex-dividend in just 4 days. The ex-dividend date is usually set to be two business days 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Thus, you can purchase Deutsche Lufthansa's shares before the 7th of May in order to receive the dividend, which the company will pay on the 9th of May.

The company's next dividend payment will be €0.30 per share. Last year, in total, the company distributed €0.30 to shareholders. Based on the last year's worth of payments, Deutsche Lufthansa has a trailing yield of 4.7% on the current stock price of €6.316. 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.

We've discovered 2 warning signs about Deutsche Lufthansa. View them for free.

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. That's why it's good to see Deutsche Lufthansa paying out a modest 29% of its earnings. 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. Dividends consumed 68% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's positive to see that Deutsche Lufthansa's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

View our latest analysis for Deutsche Lufthansa

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Deutsche Lufthansa's earnings per share have fallen at approximately 17% a year over the previous five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Deutsche Lufthansa has seen its dividend decline 5.5% per annum on average over the past nine years, which is not great to see. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

Final Takeaway

Is Deutsche Lufthansa worth buying for its dividend? Earnings per share have fallen significantly, although at least Deutsche Lufthansa paid out less than half of its profits and free cash flow over the last year, leaving some margin of safety. In summary, it's hard to get excited about Deutsche Lufthansa from a dividend perspective.

If you're not too concerned about Deutsche Lufthansa's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. For example - Deutsche Lufthansa has 2 warning signs we think you should be aware of.

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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.