Is It Smart To Buy Generalfinance S.p.A. (BIT:GF) 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 Generalfinance S.p.A. (BIT:GF) is about to trade ex-dividend in the next three 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. Meaning, you will need to purchase Generalfinance's shares before the 14th of April to receive the dividend, which will be paid on the 16th of April.

The company's upcoming dividend is €0.83 a share, following on from the last 12 months, when the company distributed a total of €0.59 per share to shareholders. Last year's total dividend payments show that Generalfinance has a trailing yield of 3.8% on the current share price of €15.50. If you buy this business for its dividend, you should have an idea of whether Generalfinance'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. That's why it's good to see Generalfinance paying out a modest 41% of its earnings.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

See our latest analysis for Generalfinance

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

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. It's encouraging to see Generalfinance has grown its earnings rapidly, up 38% a year for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, two years ago, Generalfinance has lifted its dividend by approximately 17% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

To Sum It Up

Should investors buy Generalfinance for the upcoming dividend? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. Generalfinance ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.

While it's tempting to invest in Generalfinance for the dividends alone, you should always be mindful of the risks involved. To help with this, we've discovered 1 warning sign for Generalfinance that you should be aware of before investing in their shares.

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.