Is It Smart To Buy EXEL Industries SA (EPA:EXE) Before It Goes Ex-Dividend?

It looks like EXEL Industries SA (EPA:EXE) is about to go ex-dividend in the next three days. The ex-dividend date occurs one day 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Accordingly, EXEL Industries investors that purchase the stock on or after the 11th of February will not receive the dividend, which will be paid on the 13th of February.

The company's next dividend payment will be €1.15 per share. Last year, in total, the company distributed €1.15 to shareholders. Based on the last year's worth of payments, EXEL Industries stock has a trailing yield of around 2.5% on the current share price of €45.40. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether EXEL Industries has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for EXEL Industries

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. EXEL Industries is paying out just 25% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. 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. Dividends consumed 55% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

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 earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see EXEL Industries has grown its earnings rapidly, up 50% a year for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. It looks like the EXEL Industries dividends are largely the same as they were 10 years ago.

The Bottom Line

Has EXEL Industries got what it takes to maintain its dividend payments? Earnings per share have grown at a nice rate in recent times and over the last year, EXEL Industries 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.

So while EXEL Industries looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. To help with this, we've discovered 1 warning sign for EXEL Industries that you should be aware of before investing in their 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.