Danieli & C. Officine Meccaniche S.p.A. (BIT:DAN) Looks Interesting, And It's About To Pay A Dividend

Readers hoping to buy Danieli & C. Officine Meccaniche S.p.A. (BIT:DAN) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, Danieli & C. Officine Meccaniche investors that purchase the stock on or after the 18th of November will not receive the dividend, which will be paid on the 20th of November.

The company's next dividend payment will be €0.31 per share, on the back of last year when the company paid a total of €0.31 to shareholders. Calculating the last year's worth of payments shows that Danieli & C. Officine Meccaniche has a trailing yield of 1.2% on the current share price of €25.05. If you buy this business for its dividend, you should have an idea of whether Danieli & C. Officine Meccaniche's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Danieli & C. Officine Meccaniche

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. Danieli & C. Officine Meccaniche has a low and conservative payout ratio of just 9.5% of its income after tax. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. The good news is it paid out just 15% of its free cash flow in the last year.

It's positive to see that Danieli & C. Officine Meccaniche'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.

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

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. 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's why it's comforting to see Danieli & C. Officine Meccaniche's earnings have been skyrocketing, up 29% per annum for the past five years. Danieli & C. Officine Meccaniche looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Danieli & C. Officine Meccaniche's dividend payments are broadly unchanged compared to where they were 10 years ago.

Final Takeaway

From a dividend perspective, should investors buy or avoid Danieli & C. Officine Meccaniche? Danieli & C. Officine Meccaniche has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. There's a lot to like about Danieli & C. Officine Meccaniche, and we would prioritise taking a closer look at it.

Curious what other investors think of Danieli & C. Officine Meccaniche? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.

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.