Three Days Left To Buy Bodegas Riojanas, S.A. (BME:RIO) Before The Ex-Dividend Date

Bodegas Riojanas, S.A. (BME:RIO) is about to trade ex-dividend in the next 3 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible 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. Therefore, if you purchase Bodegas Riojanas' shares on or after the 13th of September, you won't be eligible to receive the dividend, when it is paid on the 15th of September.

The company's upcoming dividend is €0.078 a share, following on from the last 12 months, when the company distributed a total of €0.096 per share to shareholders. Looking at the last 12 months of distributions, Bodegas Riojanas has a trailing yield of approximately 2.1% on its current stock price of €4.68. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Bodegas Riojanas

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Bodegas Riojanas paid out more than half (59%) of its earnings last year, which is a regular payout ratio for most companies. 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. Bodegas Riojanas paid a dividend despite reporting negative free cash flow over the last twelve months. This may be due to heavy investment in the business, but this is still suboptimal from a dividend sustainability perspective.

Click here to see how much of its profit Bodegas Riojanas paid out over the last 12 months.

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 Bodegas Riojanas earnings per share are up 4.5% per annum over the last five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. It looks like the Bodegas Riojanas dividends are largely the same as they were 10 years ago.

Final Takeaway

Is Bodegas Riojanas an attractive dividend stock, or better left on the shelf? Earnings per share have grown somewhat, although Bodegas Riojanas paid out over half its profits and the dividend was not well covered by free cash flow. It's not the most attractive proposition from a dividend perspective, and we'd probably give this one a miss for now.

With that in mind though, if the poor dividend characteristics of Bodegas Riojanas don't faze you, it's worth being mindful of the risks involved with this business. Be aware that Bodegas Riojanas is showing 4 warning signs in our investment analysis, and 1 of those is a bit concerning...

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.