Interested In Davide Campari-Milano's (BIT:CPR) Upcoming €0.065 Dividend? You Have Four Days Left

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Davide Campari-Milano N.V. (BIT:CPR) is about to trade ex-dividend in the next 4 days. Typically, the ex-dividend date is two business days 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, Davide Campari-Milano investors that purchase the stock on or after the 22nd of April will not receive the dividend, which will be paid on the 24th of April.

The company's upcoming dividend is €0.065 a share, following on from the last 12 months, when the company distributed a total of €0.065 per share to shareholders. Calculating the last year's worth of payments shows that Davide Campari-Milano has a trailing yield of 1.1% on the current share price of €5.712. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

We've discovered 3 warning signs about Davide Campari-Milano. View them for free.

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 Davide Campari-Milano's payout ratio is modest, at just 39% of profit. A useful secondary check can be to evaluate whether Davide Campari-Milano generated enough free cash flow to afford its dividend. It distributed 37% of its free cash flow as dividends, a comfortable payout level for most companies.

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.

View our latest analysis for Davide Campari-Milano

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

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. Readers will understand then, why we're concerned to see Davide Campari-Milano's earnings per share have dropped 9.1% a year over the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

We'd also point out that Davide Campari-Milano 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. In the past 10 years, Davide Campari-Milano has increased its dividend at approximately 5.0% a year on average.

To Sum It Up

Is Davide Campari-Milano worth buying for its dividend? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Davide Campari-Milano's dividend merits.

On that note, you'll want to research what risks Davide Campari-Milano is facing. In terms of investment risks, we've identified 3 warning signs with Davide Campari-Milano and understanding them should be part of your investment process.

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.