Here's What We Like About Evrofarma's (ATH:EVROF) Upcoming Dividend

Evrofarma SA (ATH:EVROF) stock is about to trade ex-dividend in three 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 Evrofarma's shares on or after the 12th of September, you won't be eligible to receive the dividend, when it is paid on the 19th of September.

The upcoming dividend for Evrofarma will put a total of €0.05 per share in shareholders' pockets. If you buy this business for its dividend, you should have an idea of whether Evrofarma's dividend is reliable and sustainable. As a result, readers should always check whether Evrofarma has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Evrofarma

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 Evrofarma paying out a modest 31% of its earnings.

Click here to see how much of its profit Evrofarma paid out over the last 12 months.

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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see Evrofarma's earnings per share have risen 18% per annum over the last five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

This is Evrofarma's first year of paying a regular dividend, so it doesn't have much of a history yet to compare to.

Final Takeaway

From a dividend perspective, should investors buy or avoid Evrofarma? Companies like Evrofarma that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. Overall, Evrofarma looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Our analysis shows 3 warning signs for Evrofarma that we strongly recommend you have a look at before investing in the company.

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.