Novozymes A/S (CPH:NZYM B) Will Pay A kr.6.00 Dividend In Three Days

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 Novozymes A/S (CPH:NZYM B) is about to go ex-dividend in just three days. The ex-dividend date occurs one day 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, Novozymes investors that purchase the stock on or after the 3rd of March will not receive the dividend, which will be paid on the 7th of March.

The company's next dividend payment will be kr.6.00 per share, on the back of last year when the company paid a total of kr.6.00 to shareholders. Last year's total dividend payments show that Novozymes has a trailing yield of 1.8% on the current share price of DKK340. If you buy this business for its dividend, you should have an idea of whether Novozymes's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Novozymes

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Novozymes paid out a comfortable 45% of its profit last year. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Over the past year it paid out 137% of its free cash flow as dividends, which is uncomfortably high. We're curious about why the company paid out more cash than it generated last year, since this can be one of the early signs that a dividend may be unsustainable.

Novozymes paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Cash is king, as they say, and were Novozymes to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

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

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Novozymes, with earnings per share up 4.7% on average over the last five years. Earnings have been growing somewhat, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Novozymes has increased its dividend at approximately 12% a year on average. 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

Has Novozymes got what it takes to maintain its dividend payments? Novozymes delivered reasonable earnings per share growth in recent times, and paid out less than half its profits and 137% of its cash flow over the last year, which is a mediocre outcome. In summary, it's hard to get excited about Novozymes from a dividend perspective.

If you want to look further into Novozymes, it's worth knowing the risks this business faces. Every company has risks, and we've spotted 1 warning sign for Novozymes 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.