F.I.L.A. - Fabbrica Italiana Lapis ed Affini S.p.A. (BIT:FILA) Looks Interesting, And It's About To Pay A Dividend

Readers hoping to buy F.I.L.A. - Fabbrica Italiana Lapis ed Affini S.p.A. (BIT:FILA) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a 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. This means that investors who purchase F.I.L.A. - Fabbrica Italiana Lapis ed Affini's shares on or after the 19th of May will not receive the dividend, which will be paid on the 21st of May.

The company's upcoming dividend is €0.40 a share, following on from the last 12 months, when the company distributed a total of €0.80 per share to shareholders. Calculating the last year's worth of payments shows that F.I.L.A. - Fabbrica Italiana Lapis ed Affini has a trailing yield of 7.7% on the current share price of €10.36. If you buy this business for its dividend, you should have an idea of whether F.I.L.A. - Fabbrica Italiana Lapis ed Affini's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. F.I.L.A. - Fabbrica Italiana Lapis ed Affini paid out a comfortable 50% of its profit last year. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It distributed 38% of its free cash flow as dividends, a comfortable payout level 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.

View our latest analysis for F.I.L.A. - Fabbrica Italiana Lapis ed Affini

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 F.I.L.A. - Fabbrica Italiana Lapis ed Affini's earnings have been skyrocketing, up 28% per annum for the past five years. F.I.L.A. - Fabbrica Italiana Lapis ed Affini is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last nine years, F.I.L.A. - Fabbrica Italiana Lapis ed Affini has lifted its dividend by approximately 27% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

To Sum It Up

Is F.I.L.A. - Fabbrica Italiana Lapis ed Affini an attractive dividend stock, or better left on the shelf? It's great that F.I.L.A. - Fabbrica Italiana Lapis ed Affini 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. Overall we think this is an attractive combination and worthy of further research.

In light of that, while F.I.L.A. - Fabbrica Italiana Lapis ed Affini has an appealing dividend, it's worth knowing the risks involved with this stock. To that end, you should learn about the 4 warning signs we've spotted with F.I.L.A. - Fabbrica Italiana Lapis ed Affini (including 1 which is a bit unpleasant).

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.