- Marine and Shipping
DFDS A/S (CPH:DFDS) Looks Like A Good Stock, And It's Going Ex-Dividend Soon
It looks like DFDS A/S (CPH:DFDS) is about to go ex-dividend in the next three 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. In other words, investors can purchase DFDS' shares before the 23rd of March in order to be eligible for the dividend, which will be paid on the 27th of March.
The company's next dividend payment will be kr.5.00 per share, on the back of last year when the company paid a total of kr.5.00 to shareholders. Based on the last year's worth of payments, DFDS has a trailing yield of 1.8% on the current stock price of DKK273.2. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether DFDS has been able to grow its dividends, or if the dividend might be cut.
Check out our latest analysis for DFDS
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. DFDS has a low and conservative payout ratio of just 14% of its income after tax. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It distributed 28% of its free cash flow as dividends, a comfortable payout level for most companies.
It's positive to see that DFDS'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.
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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see DFDS earnings per share are up 3.8% per annum over the last five years. Recent earnings growth has been limited. However, companies that see their growth slow can often choose to pay out a greater percentage of earnings to shareholders, which could see the dividend continue to rise.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, DFDS has lifted its dividend by approximately 6.0% 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.
The Bottom Line
Has DFDS got what it takes to maintain its dividend payments? Earnings per share have been growing moderately, and DFDS is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and DFDS is halfway there. DFDS looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
So while DFDS looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Case in point: We've spotted 2 warning signs for DFDS you should be aware of.
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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Find out whether DFDS is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.View the Free Analysis
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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.
DFDS A/S provides logistics solutions in Denmark and internationally.
Good value average dividend payer.