ChemoMetec A/S (CPH:CHEMM) Looks Interesting, And It's About To Pay A Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see ChemoMetec A/S (CPH:CHEMM) is about to trade ex-dividend in the next 4 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. Therefore, if you purchase ChemoMetec's shares on or after the 13th of October, you won't be eligible to receive the dividend, when it is paid on the 17th of October.

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 ChemoMetec has a trailing yield of 1.8% on the current share price of DKK330.4. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for ChemoMetec

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. ChemoMetec paid out more than half (58%) of its earnings last year, which is a regular payout ratio for most companies.

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. It's encouraging to see ChemoMetec has grown its earnings rapidly, up 54% a year for the past five years. Management appears to be striking a nice balance between reinvesting for growth and paying dividends to shareholders. With a reasonable payout ratio, profits being reinvested, and some earnings growth, ChemoMetec could have strong prospects for future increases to the dividend.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. ChemoMetec's dividend payments per share have declined at 5.4% per year on average over the past four years, which is uninspiring. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.

Final Takeaway

Has ChemoMetec got what it takes to maintain its dividend payments? ChemoMetec has an acceptable payout ratio and its earnings per share have been improving at a decent rate. Overall, ChemoMetec looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

While it's tempting to invest in ChemoMetec for the dividends alone, you should always be mindful of the risks involved. To that end, you should learn about the 3 warning signs we've spotted with ChemoMetec (including 1 which is potentially serious).

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.