Desarrollos Especiales de Sistemas de Anclaje (BME:DESA) Could Be A Buy For Its Upcoming Dividend

Desarrollos Especiales de Sistemas de Anclaje, S.A. (BME:DESA) stock is about to trade ex-dividend in 4 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled 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. Therefore, if you purchase Desarrollos Especiales de Sistemas de Anclaje's shares on or after the 16th of September, you won't be eligible to receive the dividend, when it is paid on the 18th of September.

The company's upcoming dividend is €0.2275159 a share, following on from the last 12 months, when the company distributed a total of €1.12 per share to shareholders. Last year's total dividend payments show that Desarrollos Especiales de Sistemas de Anclaje has a trailing yield of 6.4% on the current share price of €13.20. 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.

View our latest analysis for Desarrollos Especiales de Sistemas de Anclaje

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Desarrollos Especiales de Sistemas de Anclaje paid out more than half (70%) of its earnings last year, which is a regular payout ratio for most companies. A useful secondary check can be to evaluate whether Desarrollos Especiales de Sistemas de Anclaje generated enough free cash flow to afford its dividend. It distributed 38% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that Desarrollos Especiales de Sistemas de Anclaje'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?

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. Fortunately for readers, Desarrollos Especiales de Sistemas de Anclaje's earnings per share have been growing at 12% a year for the past five years. Desarrollos Especiales de Sistemas de Anclaje is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last five years, Desarrollos Especiales de Sistemas de Anclaje has lifted its dividend by approximately 8.5% 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

From a dividend perspective, should investors buy or avoid Desarrollos Especiales de Sistemas de Anclaje? We like Desarrollos Especiales de Sistemas de Anclaje's growing earnings per share and the fact that - while its payout ratio is around average - it paid out a lower percentage of its cash flow. It's a promising combination that should mark this company worthy of closer attention.

In light of that, while Desarrollos Especiales de Sistemas de Anclaje has an appealing dividend, it's worth knowing the risks involved with this stock. To help with this, we've discovered 2 warning signs for Desarrollos Especiales de Sistemas de Anclaje that you should be aware of before investing in their shares.

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.