Only Three Days Left To Cash In On Danieli & C. Officine Meccaniche's (BIT:DAN) Dividend

Danieli & C. Officine Meccaniche S.p.A. (BIT:DAN) stock is about to trade ex-dividend in 3 days. You will need to purchase shares before the 23rd of November to receive the dividend, which will be paid on the 25th of November.

Danieli & C. Officine Meccaniche's upcoming dividend is €0.14 a share, following on from the last 12 months, when the company distributed a total of €0.14 per share to shareholders. Based on the last year's worth of payments, Danieli & C. Officine Meccaniche has a trailing yield of 1.0% on the current stock price of €14.3. 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. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Danieli & C. Officine Meccaniche

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Danieli & C. Officine Meccaniche is paying out just 17% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. A useful secondary check can be to evaluate whether Danieli & C. Officine Meccaniche generated enough free cash flow to afford its dividend. Over the last year it paid out 72% of its free cash flow as dividends, within the usual range for most companies.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

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

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. Danieli & C. Officine Meccaniche's earnings per share have fallen at approximately 17% a year over the previous five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Danieli & C. Officine Meccaniche has seen its dividend decline 8.2% per annum on average over the past 10 years, which is not great to see. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

To Sum It Up

Should investors buy Danieli & C. Officine Meccaniche for the upcoming dividend? Its earnings per share have been declining meaningfully, although it is paying out less than half its income and more than half its cash flow as dividends. Neither payout ratio appears an immediate concern, but we're concerned about the earnings. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Danieli & C. Officine Meccaniche's dividend merits.

However if you're still interested in Danieli & C. Officine Meccaniche as a potential investment, you should definitely consider some of the risks involved with Danieli & C. Officine Meccaniche. Our analysis shows 1 warning sign for Danieli & C. Officine Meccaniche and you should be aware of this before buying any shares.

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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