Getlink SE (EPA:GET) Will Pay A €0.55 Dividend In Four Days

It looks like Getlink SE (EPA:GET) is about to go ex-dividend in the next four days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. This means that investors who purchase Getlink's shares on or after the 30th of May will not receive the dividend, which will be paid on the 5th of June.

The company's next dividend payment will be €0.55 per share, on the back of last year when the company paid a total of €0.55 to shareholders. Calculating the last year's worth of payments shows that Getlink has a trailing yield of 3.4% on the current share price of €16.14. If you buy this business for its dividend, you should have an idea of whether Getlink's dividend is reliable and sustainable. So we need to investigate whether Getlink can afford its dividend, and if the dividend could grow.

See our latest analysis for Getlink

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. Last year, Getlink paid out 91% of its income as dividends, which is above a level that we're comfortable with, especially if the company needs to reinvest in its business. 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. Fortunately, it paid out only 30% of its free cash flow in the past year.

It's good to see that while Getlink's dividends were not well covered by profits, at least they are affordable from a cash perspective. Still, if the company continues paying out such a high percentage of its profits, the dividend could be at risk if business turns sour.

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. For this reason, we're glad to see Getlink's earnings per share have risen 20% per annum over the last five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Getlink has increased its dividend at approximately 14% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

To Sum It Up

Should investors buy Getlink for the upcoming dividend? Earnings per share have been rising nicely although, even though its cashflow payout ratio is low, we question why Getlink is paying out so much of its profit. Overall, it's hard to get excited about Getlink from a dividend perspective.

While it's tempting to invest in Getlink for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 3 warning signs for Getlink (of which 2 are concerning!) you should know about.

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.