BIFIRE S.p.A. (BIT:FIRE) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

BIFIRE S.p.A. (BIT:FIRE) is about to trade ex-dividend in the next 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. 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 BIFIRE's shares on or after the 11th of November, you won't be eligible to receive the dividend, when it is paid on the 13th of November.

The company's next dividend payment will be €0.0285 per share, and in the last 12 months, the company paid a total of €0.11 per share. Based on the last year's worth of payments, BIFIRE stock has a trailing yield of around 3.9% on the current share price of €2.80. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for BIFIRE

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see BIFIRE paying out a modest 28% of its earnings. A useful secondary check can be to evaluate whether BIFIRE generated enough free cash flow to afford its dividend. The good news is it paid out just 7.7% of its free cash flow in the last year.

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?

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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why we're optimistic about BIFIRE's earnings, which have ripped higher, up 20% over the past year. While we'd be remiss not to point out that a year is a very short time in dividend investing, it's an encouraging sign so far. BIFIRE is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.

We do note though, one year is too short a time to be drawing strong conclusions about a company's future growth prospects.

Unfortunately BIFIRE has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

Final Takeaway

Is BIFIRE an attractive dividend stock, or better left on the shelf? BIFIRE has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. Overall we think this is an attractive combination and worthy of further research.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Every company has risks, and we've spotted 3 warning signs for BIFIRE you should know about.

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.