Fervi S.p.A. (BIT:FVI) Looks Interesting, And It's About To Pay A Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Fervi S.p.A. (BIT:FVI) is about to go ex-dividend in just 3 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a 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. Meaning, you will need to purchase Fervi's shares before the 6th of May to receive the dividend, which will be paid on the 8th of May.

The company's upcoming dividend is €0.47 a share, following on from the last 12 months, when the company distributed a total of €0.47 per share to shareholders. Based on the last year's worth of payments, Fervi has a trailing yield of 2.7% on the current stock price of €17.20. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Fervi can afford its dividend, and if the dividend could grow.

View our latest analysis for Fervi

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. Fervi paid out a comfortable 29% of its profit last year. 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. Thankfully its dividend payments took up just 38% of the free cash flow it generated, which is a comfortable payout ratio.

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 how much of its profit Fervi paid out over the last 12 months.

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, Fervi's earnings per share have been growing at 17% a year for the past five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past six years, Fervi has increased its dividend at approximately 21% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

To Sum It Up

Is Fervi an attractive dividend stock, or better left on the shelf? Fervi 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.

So while Fervi looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Case in point: We've spotted 2 warning signs for Fervi you should be aware of.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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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.