Why You Might Be Interested In Aedas Homes, S.A. (BME:AEDAS) For Its Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Aedas Homes, S.A. (BME:AEDAS) is about to trade ex-dividend in the next 3 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. In other words, investors can purchase Aedas Homes' shares before the 19th of December in order to be eligible for the dividend, which will be paid on the 23rd of December.

The company's next dividend payment will be €0.90 per share. Last year, in total, the company distributed €2.49 to shareholders. Based on the last year's worth of payments, Aedas Homes has a trailing yield of 9.9% on the current stock price of €25.05. 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.

Check out our latest analysis for Aedas Homes

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. Aedas Homes has a low and conservative payout ratio of just 8.0% of its income after tax. A useful secondary check can be to evaluate whether Aedas Homes generated enough free cash flow to afford its dividend. Over the last year it paid out 54% of its free cash flow as dividends, within the usual range for most companies.

It's positive to see that Aedas Homes'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 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. For this reason, we're glad to see Aedas Homes's earnings per share have risen 19% per annum over the last five years. Aedas Homes has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. This is a reasonable combination that could hint at some 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. Aedas Homes has delivered 40% dividend growth per year on average over the past three years. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

Final Takeaway

Should investors buy Aedas Homes for the upcoming dividend? Earnings per share have grown at a nice rate in recent times and over the last year, Aedas Homes paid out less than half its earnings and a bit over half its free cash flow. There's a lot to like about Aedas Homes, and we would prioritise taking a closer look at it.

In light of that, while Aedas Homes has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 3 warning signs for Aedas Homes (1 doesn't sit too well with us!) that deserve your attention before investing in the shares.

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.