Just Three Days Till Naturhouse Health, S.A. (BME:NTH) Will Be Trading Ex-Dividend

It looks like Naturhouse Health, S.A. (BME:NTH) is about to go ex-dividend in the next three days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Thus, you can purchase Naturhouse Health's shares before the 29th of August in order to receive the dividend, which the company will pay on the 2nd of September.

The company's next dividend payment will be €0.081 per share. Last year, in total, the company distributed €0.10 to shareholders. Based on the last year's worth of payments, Naturhouse Health stock has a trailing yield of around 5.1% on the current share price of €1.975. If you buy this business for its dividend, you should have an idea of whether Naturhouse Health's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Naturhouse Health

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Fortunately Naturhouse Health's payout ratio is modest, at just 41% of profit. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It distributed 29% of its free cash flow as dividends, a comfortable payout level 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 how much of its profit Naturhouse Health 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. Readers will understand then, why we're concerned to see Naturhouse Health's earnings per share have dropped 6.0% a year over the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Naturhouse Health's dividend payments are broadly unchanged compared to where they were nine years ago. If a company's dividend stays flat while earnings are in decline, this is typically a sign that it is paying out a larger percentage of its earnings. This can become unsustainable if earnings fall far enough.

Final Takeaway

Should investors buy Naturhouse Health for the upcoming dividend? Naturhouse Health 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. To summarise, Naturhouse Health looks okay on this analysis, although it doesn't appear a stand-out opportunity.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. To help with this, we've discovered 2 warning signs for Naturhouse Health (1 is a bit concerning!) that you ought to be aware of before buying the shares.

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.