Four Days Left To Buy Ebro Foods, S.A. (BME:EBRO) Before The Ex-Dividend Date

Ebro Foods, S.A. (BME:EBRO) stock is about to trade ex-dividend in 4 days. You will need to purchase shares before the 23rd of December to receive the dividend, which will be paid on the 28th of December.

Ebro Foods's next dividend payment will be €1.57 per share, which looks like a nice increase on last year, when the company distributed a total of €0.57 to shareholders. If you buy this business for its dividend, you should have an idea of whether Ebro Foods's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Ebro Foods

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Ebro Foods paid out 57% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Thankfully its dividend payments took up just 42% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that Ebro Foods'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?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're not enthused to see that Ebro Foods's earnings per share have remained effectively flat over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share. Earnings growth has been slim and the company is paying out more than half of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Ebro Foods has seen its dividend decline 5.5% per annum on average over the past 10 years, which is not great to see.

The Bottom Line

Has Ebro Foods got what it takes to maintain its dividend payments? It's unfortunate that earnings per share have not grown, and we'd note that Ebro Foods is paying out lower percentage of its cashflow than its profit, but overall the dividend looks well covered by earnings. All things considered, we are not particularly enthused about Ebro Foods from a dividend perspective.

While it's tempting to invest in Ebro Foods for the dividends alone, you should always be mindful of the risks involved. For example - Ebro Foods has 2 warning signs we think you should be aware of.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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