Is It Worth Considering Laboratorio Reig Jofre, S.A. (BME:RJF) For Its Upcoming 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 Laboratorio Reig Jofre, S.A. (BME:RJF) is about to go ex-dividend in just 3 days. The ex-dividend date is one business day before a company's record date, 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. Accordingly, Laboratorio Reig Jofre investors that purchase the stock on or after the 17th of May will not receive the dividend, which will be paid on the 4th of June.

The company's next dividend payment will be €0.0324 per share, and in the last 12 months, the company paid a total of €0.04 per share. Looking at the last 12 months of distributions, Laboratorio Reig Jofre has a trailing yield of approximately 1.5% on its current stock price of €2.75. If you buy this business for its dividend, you should have an idea of whether Laboratorio Reig Jofre's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Laboratorio Reig Jofre

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Laboratorio Reig Jofre's payout ratio is modest, at just 31% of profit. 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. Luckily it paid out just 0.6% of its free cash flow last year.

It's positive to see that Laboratorio Reig Jofre'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 how much of its profit Laboratorio Reig Jofre paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. So we're not too excited that Laboratorio Reig Jofre's earnings are down 3.2% a year over the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Laboratorio Reig Jofre has seen its dividend decline 3.9% per annum on average over the past three years, which is not great to see. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

To Sum It Up

Has Laboratorio Reig Jofre got what it takes to maintain its dividend payments? Laboratorio Reig Jofre has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. Overall, it's hard to get excited about Laboratorio Reig Jofre from a dividend perspective.

Keen to explore more data on Laboratorio Reig Jofre's financial performance? Check out our visualisation of its historical revenue and earnings growth.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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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.