Here's What We Like About Desarrollos Especiales de Sistemas de Anclaje's (BME:DESA) Upcoming Dividend

Desarrollos Especiales de Sistemas de Anclaje, S.A. (BME:DESA) stock is about to trade ex-dividend in three days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Thus, you can purchase Desarrollos Especiales de Sistemas de Anclaje's shares before the 23rd of July in order to receive the dividend, which the company will pay on the 25th of July.

The company's upcoming dividend is €0.2275131 a share, following on from the last 12 months, when the company distributed a total of €1.12 per share to shareholders. Based on the last year's worth of payments, Desarrollos Especiales de Sistemas de Anclaje has a trailing yield of 6.9% on the current stock price of €16.20. 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! So we need to investigate whether Desarrollos Especiales de Sistemas de Anclaje can afford its dividend, and if the dividend could grow.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Desarrollos Especiales de Sistemas de Anclaje paying out a modest 42% of its earnings. A useful secondary check can be to evaluate whether Desarrollos Especiales de Sistemas de Anclaje generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 48% of the free cash flow it generated, which is a comfortable payout ratio.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Check out our latest analysis for Desarrollos Especiales de Sistemas de Anclaje

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see Desarrollos Especiales de Sistemas de Anclaje's earnings have been skyrocketing, up 25% per annum for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last five years, Desarrollos Especiales de Sistemas de Anclaje has lifted its dividend by approximately 15% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

The Bottom Line

From a dividend perspective, should investors buy or avoid Desarrollos Especiales de Sistemas de Anclaje? It's great that Desarrollos Especiales de Sistemas de Anclaje is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. It's a promising combination that should mark this company worthy of closer attention.

On that note, you'll want to research what risks Desarrollos Especiales de Sistemas de Anclaje is facing. Our analysis shows 2 warning signs for Desarrollos Especiales de Sistemas de Anclaje and you should be aware of them before buying any shares.

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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.