Global Dominion Access, S.A. (BME:DOM) Looks Interesting, And It's About To Pay A Dividend

It looks like Global Dominion Access, S.A. (BME:DOM) is about to go ex-dividend in the next 4 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. Therefore, if you purchase Global Dominion Access' shares on or after the 5th of July, you won't be eligible to receive the dividend, when it is paid on the 9th of July.

The company's upcoming dividend is €0.0791775 a share, following on from the last 12 months, when the company distributed a total of €0.098 per share to shareholders. Last year's total dividend payments show that Global Dominion Access has a trailing yield of 3.0% on the current share price of €3.22. 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.

Check out our latest analysis for Global Dominion Access

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. That's why it's good to see Global Dominion Access paying out a modest 32% of its earnings. 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 59% 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?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Global Dominion Access, with earnings per share up 8.1% on average over the last five years. Decent historical earnings per share growth suggests Global Dominion Access has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last four years, Global Dominion Access has lifted its dividend by approximately 11% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

Final Takeaway

Is Global Dominion Access worth buying for its dividend? Earnings per share growth has been modest, and it's interesting that Global Dominion Access is paying out less than half of its earnings and more than half its cash flow to shareholders in the form of dividends. To summarise, Global Dominion Access looks okay on this analysis, although it doesn't appear a stand-out opportunity.

While it's tempting to invest in Global Dominion Access for the dividends alone, you should always be mindful of the risks involved. We've identified 2 warning signs with Global Dominion Access (at least 1 which is concerning), and understanding these should be part of your investment process.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.

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