Here's What We Like About Laboratorios Farmaceuticos Rovi's (BME:ROVI) Upcoming Dividend

Readers hoping to buy Laboratorios Farmaceuticos Rovi, S.A. (BME:ROVI) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 Laboratorios Farmaceuticos Rovi's shares on or after the 14th of July, you won't be eligible to receive the dividend, when it is paid on the 16th of July.

The company's next dividend payment will be €0.757431 per share, and in the last 12 months, the company paid a total of €0.94 per share. Last year's total dividend payments show that Laboratorios Farmaceuticos Rovi has a trailing yield of 1.7% on the current share price of €55.30. If you buy this business for its dividend, you should have an idea of whether Laboratorios Farmaceuticos Rovi's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fortunately Laboratorios Farmaceuticos Rovi's payout ratio is modest, at just 34% of profit. 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. It paid out more than half (70%) of its free cash flow in the past year, which is within an average range for most companies.

It's positive to see that Laboratorios Farmaceuticos Rovi'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.

Check out our latest analysis for Laboratorios Farmaceuticos Rovi

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 fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Laboratorios Farmaceuticos Rovi's earnings have been skyrocketing, up 31% per annum for the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Laboratorios Farmaceuticos Rovi has lifted its dividend by approximately 19% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

Final Takeaway

Is Laboratorios Farmaceuticos Rovi worth buying for its dividend? Earnings per share have grown at a nice rate in recent times and over the last year, Laboratorios Farmaceuticos Rovi paid out less than half its earnings and a bit over half its free cash flow. It's a promising combination that should mark this company worthy of closer attention.

Ever wonder what the future holds for Laboratorios Farmaceuticos Rovi? See what the eight analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

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.