Richter Gedeon Vegyészeti Gyár Nyilvánosan Muködo Rt. (BUSE:RICHTER) Pays A Ft0423.00 Dividend In Just Four Days

Richter Gedeon Vegyészeti Gyár Nyilvánosan Muködo Rt. (BUSE:RICHTER) stock is about to trade ex-dividend in 4 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. Accordingly, Richter Gedeon Vegyészeti Gyár Nyilvánosan Muködo Rt investors that purchase the stock on or after the 5th of June will not receive the dividend, which will be paid on the 13th of June.

The company's next dividend payment will be Ft0423.00 per share, and in the last 12 months, the company paid a total of Ft423 per share. Calculating the last year's worth of payments shows that Richter Gedeon Vegyészeti Gyár Nyilvánosan Muködo Rt has a trailing yield of 4.6% on the current share price of Ft09115.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Richter Gedeon Vegyészeti Gyár Nyilvánosan Muködo Rt has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Richter Gedeon Vegyészeti Gyár Nyilvánosan Muködo Rt

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. Richter Gedeon Vegyészeti Gyár Nyilvánosan Muködo Rt paid out a comfortable 49% of its profit last year. 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. Richter Gedeon Vegyészeti Gyár Nyilvánosan Muködo Rt paid out more free cash flow than it generated - 112%, to be precise - last year, which we think is concerningly high. We're curious about why the company paid out more cash than it generated last year, since this can be one of the early signs that a dividend may be unsustainable.

While Richter Gedeon Vegyészeti Gyár Nyilvánosan Muködo Rt's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Cash is king, as they say, and were Richter Gedeon Vegyészeti Gyár Nyilvánosan Muködo Rt to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Richter Gedeon Vegyészeti Gyár Nyilvánosan Muködo Rt's earnings have been skyrocketing, up 40% per annum for the past five years. Earnings have been growing quickly, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Richter Gedeon Vegyészeti Gyár Nyilvánosan Muködo Rt has delivered an average of 22% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

Final Takeaway

From a dividend perspective, should investors buy or avoid Richter Gedeon Vegyészeti Gyár Nyilvánosan Muködo Rt? We like that Richter Gedeon Vegyészeti Gyár Nyilvánosan Muködo Rt has been successfully growing its earnings per share at a nice rate and reinvesting most of its profits in the business. However, we note the high cashflow payout ratio with some concern. In summary, while it has some positive characteristics, we're not inclined to race out and buy Richter Gedeon Vegyészeti Gyár Nyilvánosan Muködo Rt today.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. To help with this, we've discovered 1 warning sign for Richter Gedeon Vegyészeti Gyár Nyilvánosan Muködo Rt that you should be aware of before investing in their shares.

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

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

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.