Emak S.p.A. (BIT:EM) Goes Ex-Dividend Soon

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 Emak S.p.A. (BIT:EM) is about to go ex-dividend in just three days. 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. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Meaning, you will need to purchase Emak's shares before the 2nd of June to receive the dividend, which will be paid on the 4th of June.

The company's next dividend payment will be €0.025 per share. Last year, in total, the company distributed €0.025 to shareholders. Last year's total dividend payments show that Emak has a trailing yield of 2.6% on the current share price of €0.958. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.

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.

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. Fortunately Emak's payout ratio is modest, at just 45% of profit. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out 86% 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.

Check out our latest analysis for Emak

Click here to see how much of its profit Emak paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. Emak's earnings per share have fallen at approximately 6.7% a year over the previous five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. It looks like the Emak dividends are largely the same as they were 10 years ago. If a company's dividend stays flat while earnings are in decline, this is typically a sign that it is paying out a larger percentage of its earnings. This can become unsustainable if earnings fall far enough.

Final Takeaway

Has Emak got what it takes to maintain its dividend payments? Earnings per share have fallen significantly, although at least Emak paid out less than half of its profits and free cash flow over the last year, leaving some margin of safety. Overall, it's hard to get excited about Emak from a dividend perspective.

However if you're still interested in Emak as a potential investment, you should definitely consider some of the risks involved with Emak. For example, Emak has 4 warning signs (and 1 which is a bit unpleasant) we think you should know about.

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