It Might Not Be A Great Idea To Buy Neodecortech S.p.A. (BIT:NDT) For Its Next Dividend

Neodecortech S.p.A. (BIT:NDT) stock is about to trade ex-dividend in three days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Therefore, if you purchase Neodecortech's shares on or after the 19th of May, you won't be eligible to receive the dividend, when it is paid on the 21st of May.

The company's next dividend payment will be €0.15 per share, on the back of last year when the company paid a total of €0.15 to shareholders. Based on the last year's worth of payments, Neodecortech has a trailing yield of 4.9% on the current stock price of €3.04. If you buy this business for its dividend, you should have an idea of whether Neodecortech's dividend is reliable and sustainable. As a result, readers should always check whether Neodecortech has been able to grow its dividends, or if the dividend might be cut.

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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. Neodecortech paid out 51% of its earnings to investors last year, a normal payout level for most businesses. Neodecortech paid a dividend despite reporting negative free cash flow last year. That's typically a bad combination and - if this were more than a one-off - not sustainable.

Check out our latest analysis for Neodecortech

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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's not encouraging to see that Neodecortech'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.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Neodecortech's dividend payments are effectively flat on where they were seven years ago.

Final Takeaway

Should investors buy Neodecortech for the upcoming dividend? Earnings per share have not grown at all, and the company pays out a bit over half its profits to shareholders. We're unconvinced on the company's merits, and think there might be better opportunities out there.

With that being said, if dividends aren't your biggest concern with Neodecortech, you should know about the other risks facing this business. We've identified 3 warning signs with Neodecortech (at least 1 which is a bit unpleasant), and understanding them should be part of your investment process.

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.