Is It Smart To Buy BFF Bank S.p.A. (BIT:BFF) Before It Goes Ex-Dividend?

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see BFF Bank S.p.A. (BIT:BFF) is about to trade ex-dividend in the next 4 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a 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. Meaning, you will need to purchase BFF Bank's shares before the 24th of April to receive the dividend, which will be paid on the 26th of April.

The company's upcoming dividend is €0.42 a share, following on from the last 12 months, when the company distributed a total of €0.79 per share to shareholders. Calculating the last year's worth of payments shows that BFF Bank has a trailing yield of 8.4% on the current share price of €9.47. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether BFF Bank has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for BFF Bank

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. BFF Bank is paying out an acceptable 63% of its profit, a common payout level among most companies.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. For this reason, we're glad to see BFF Bank's earnings per share have risen 17% per annum over the last five years.

We'd also point out that BFF Bank issued a meaningful number of new shares in the past year. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. BFF Bank has delivered 10.0% dividend growth per year on average over the past five years. 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 BFF Bank for the upcoming dividend? Earnings per share are growing nicely, and BFF Bank is paying out a percentage of its earnings that is around the average for dividend-paying stocks. In summary, BFF Bank appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

In light of that, while BFF Bank has an appealing dividend, it's worth knowing the risks involved with this stock. Be aware that BFF Bank is showing 4 warning signs in our investment analysis, and 1 of those makes us a bit uncomfortable...

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.