Here's What We Like About F.I.L.A. - Fabbrica Italiana Lapis ed Affini's (BIT:FILA) Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see F.I.L.A. - Fabbrica Italiana Lapis ed Affini S.p.A. (BIT:FILA) 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase F.I.L.A. - Fabbrica Italiana Lapis ed Affini's shares on or after the 17th of November will not receive the dividend, which will be paid on the 19th of November.

The company's next dividend payment will be €0.40 per share, and in the last 12 months, the company paid a total of €0.80 per share. Based on the last year's worth of payments, F.I.L.A. - Fabbrica Italiana Lapis ed Affini has a trailing yield of 8.4% on the current stock price of €9.56. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That's why it's good to see F.I.L.A. - Fabbrica Italiana Lapis ed Affini paying out a modest 32% of its earnings. 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. It paid out 76% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.

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.

See 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?

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. That's why it's comforting to see F.I.L.A. - Fabbrica Italiana Lapis ed Affini's earnings have been skyrocketing, up 21% per annum for the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, F.I.L.A. - Fabbrica Italiana Lapis ed Affini has lifted its dividend by approximately 24% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

Final Takeaway

From a dividend perspective, should investors buy or avoid F.I.L.A. - Fabbrica Italiana Lapis ed Affini? From a dividend perspective, we're encouraged to see that earnings per share have been growing, the company is paying out less than half of its earnings, and a bit over half its free cash flow. It's a promising combination that should mark this company worthy of closer attention.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For instance, we've identified 5 warning signs for F.I.L.A. - Fabbrica Italiana Lapis ed Affini (1 shouldn't be ignored) you should be aware of.

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.