Read This Before Considering Indel B S.p.A. (BIT:INDB) For Its Upcoming €0.80 Dividend

Readers hoping to buy Indel B S.p.A. (BIT:INDB) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. In other words, investors can purchase Indel B's shares before the 3rd of June in order to be eligible for the dividend, which will be paid on the 5th of June.

The company's upcoming dividend is €0.80 a share, following on from the last 12 months, when the company distributed a total of €0.80 per share to shareholders. Based on the last year's worth of payments, Indel B stock has a trailing yield of around 3.5% on the current share price of €23.00. If you buy this business for its dividend, you should have an idea of whether Indel B's dividend is reliable and sustainable. As a result, readers should always check whether Indel B has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Indel B

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. That's why it's good to see Indel B paying out a modest 43% 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 18% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that Indel B'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.

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

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's not encouraging to see that Indel B's earnings are effectively flat over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last six years, Indel B has lifted its dividend by approximately 2.7% a year on average.

Final Takeaway

From a dividend perspective, should investors buy or avoid Indel B? While it's not great to see that earnings per share are effectively flat over the six-year period we checked, at least the payout ratios are low and conservative. To summarise, Indel B looks okay on this analysis, although it doesn't appear a stand-out opportunity.

On that note, you'll want to research what risks Indel B is facing. In terms of investment risks, we've identified 1 warning sign with Indel B and understanding them should be part of your investment process.

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.