Tenaris S.A. (BIT:TEN) Looks Interesting, And It's About To Pay A Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Tenaris S.A. (BIT:TEN) is about to trade ex-dividend in the next three 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 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. Accordingly, Tenaris investors that purchase the stock on or after the 20th of November will not receive the dividend, which will be paid on the 22nd of November.

The company's next dividend payment will be US$0.20 per share, and in the last 12 months, the company paid a total of US$0.54 per share. Last year's total dividend payments show that Tenaris has a trailing yield of 3.1% on the current share price of €16.12. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for Tenaris

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. Tenaris has a low and conservative payout ratio of just 18% of its income after tax. A useful secondary check can be to evaluate whether Tenaris generated enough free cash flow to afford its dividend. It paid out 17% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that Tenaris'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?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Tenaris's earnings have been skyrocketing, up 51% per annum for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, Tenaris looks like a promising growth company.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Tenaris has lifted its dividend by approximately 2.3% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Tenaris is keeping back more of its profits to grow the business.

To Sum It Up

Is Tenaris worth buying for its dividend? It's great that Tenaris is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. Tenaris looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

While it's tempting to invest in Tenaris for the dividends alone, you should always be mindful of the risks involved. For example, Tenaris has 2 warning signs (and 1 which is significant) we think you should know about.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.