Just Three Days Till Ebro Foods, S.A. (BME:EBRO) Will Be Trading Ex-Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Ebro Foods, S.A. (BME:EBRO) is about to go ex-dividend in just three days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order 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 Ebro Foods' shares on or after the 26th of June, you won't be eligible to receive the dividend, when it is paid on the 30th of June.

The company's next dividend payment will be €0.1863 per share, on the back of last year when the company paid a total of €0.69 to shareholders. Looking at the last 12 months of distributions, Ebro Foods has a trailing yield of approximately 3.9% on its current stock price of €17.50. If you buy this business for its dividend, you should have an idea of whether Ebro Foods's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

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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. Ebro Foods paid out 51% of its earnings to investors last year, a normal payout level for most businesses. 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. Over the last year it paid out 73% of its free cash flow as dividends, within the usual range for most companies.

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 Ebro Foods

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. For this reason, we're glad to see Ebro Foods's earnings per share have risen 13% per annum over the last five years. Ebro Foods has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. 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. Ebro Foods has delivered 3.3% dividend growth per year on average over the past 10 years. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

The Bottom Line

Is Ebro Foods an attractive dividend stock, or better left on the shelf? It's good to see earnings are growing, since all of the best dividend stocks grow their earnings meaningfully over the long run. However, we'd also note that Ebro Foods is paying out more than half of its earnings and cash flow as profits, which could limit the dividend growth if earnings growth slows. To summarise, Ebro Foods looks okay on this analysis, although it doesn't appear a stand-out opportunity.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example - Ebro Foods has 1 warning sign we think you should be aware of.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.