Here's What We Like About Prysmian's (BIT:PRY) Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Prysmian S.p.A. (BIT:PRY) is about to trade ex-dividend in the next 4 days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves at least 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, Prysmian investors that purchase the stock on or after the 22nd of April will not receive the dividend, which will be paid on the 24th of April.

The company's next dividend payment will be €0.80 per share. Last year, in total, the company distributed €0.80 to shareholders. Last year's total dividend payments show that Prysmian has a trailing yield of 1.8% on the current share price of €44.71. If you buy this business for its dividend, you should have an idea of whether Prysmian's dividend is reliable and sustainable. As a result, readers should always check whether Prysmian has been able to grow its dividends, or if the dividend might be cut.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Prysmian paid out a comfortable 31% of its profit last year. A useful secondary check can be to evaluate whether Prysmian generated enough free cash flow to afford its dividend. The good news is it paid out just 17% of its free cash flow in the last year.

It's positive to see that Prysmian'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.

View our latest analysis for Prysmian

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

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, Prysmian's earnings per share have been growing at 18% a year for the past five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Prysmian has lifted its dividend by approximately 6.7% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

The Bottom Line

Should investors buy Prysmian for the upcoming dividend? It's great that Prysmian is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. It's a promising combination that should mark this company worthy of closer attention.

So while Prysmian looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example - Prysmian has 2 warning signs we think you should be aware of.

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.