Roche Bobois S.A. (EPA:RBO) stock is about to trade ex-dividend in four days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. 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 Roche Bobois' shares on or after the 18th of June, you won't be eligible to receive the dividend, when it is paid on the 22nd of June.
The company's next dividend payment will be €0.50 per share. Last year, in total, the company distributed €0.50 to shareholders. Based on the last year's worth of payments, Roche Bobois stock has a trailing yield of around 2.1% on the current share price of €23.3. If you buy this business for its dividend, you should have an idea of whether Roche Bobois's dividend is reliable and sustainable. So we need to investigate whether Roche Bobois can afford its dividend, and if the dividend could grow.
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. That's why it's good to see Roche Bobois paying out a modest 49% of its earnings. 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 paid out 1.8% of its free cash flow as dividends last year, which is conservatively low.
It's positive to see that Roche Bobois'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.
Have Earnings And Dividends Been Growing?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That explains why we're not overly excited about Roche Bobois's flat earnings over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last two years, Roche Bobois has lifted its dividend by approximately 36% a year on average.
To Sum It Up
Is Roche Bobois worth buying for its dividend? Earnings per share have been flat, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend gets cut. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.
So while Roche Bobois looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example - Roche Bobois has 2 warning signs we think you should be aware of.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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This article by Simply Wall St is general in nature. 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.
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