Just Three Days Till Atresmedia Corporación de Medios de Comunicación, S.A. (BME:A3M) Will Be Trading Ex-Dividend

Readers hoping to buy Atresmedia Corporación de Medios de Comunicación, S.A. (BME:A3M) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date occurs one day 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. This means that investors who purchase Atresmedia Corporación de Medios de Comunicación's shares on or after the 18th of June will not receive the dividend, which will be paid on the 20th of June.

The company's upcoming dividend is €0.1944 a share, following on from the last 12 months, when the company distributed a total of €0.40 per share to shareholders. Based on the last year's worth of payments, Atresmedia Corporación de Medios de Comunicación has a trailing yield of 8.5% on the current stock price of €4.97. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Atresmedia Corporación de Medios de Comunicación

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Atresmedia Corporación de Medios de Comunicación paid out 55% 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 66% 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.

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. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see Atresmedia Corporación de Medios de Comunicación's earnings per share have risen 14% per annum over the last five years. Atresmedia Corporación de Medios de Comunicación 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.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Atresmedia Corporación de Medios de Comunicación has delivered an average of 14% per year annual increase in its dividend, based on the past 10 years of dividend payments. 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 Atresmedia Corporación de Medios de Comunicación? 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 Atresmedia Corporación de Medios de Comunicación is paying out more than half of its earnings and cash flow as profits, which could limit the dividend growth if earnings growth slows. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

In light of that, while Atresmedia Corporación de Medios de Comunicación has an appealing dividend, it's worth knowing the risks involved with this stock. Be aware that Atresmedia Corporación de Medios de Comunicación is showing 2 warning signs in our investment analysis, and 1 of those shouldn't be ignored...

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com