Do These 3 Checks Before Buying Fine Foods & Pharmaceuticals N.T.M. S.p.A. (BIT:FF) For Its Upcoming Dividend

It looks like Fine Foods & Pharmaceuticals N.T.M. S.p.A. (BIT:FF) is about to go ex-dividend in the next 4 days. The ex-dividend date occurs one day 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 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. Thus, you can purchase Fine Foods & Pharmaceuticals N.T.M's shares before the 3rd of June in order to receive the dividend, which the company will pay on the 5th of June.

The company's next dividend payment will be €0.12 per share, on the back of last year when the company paid a total of €0.12 to shareholders. Based on the last year's worth of payments, Fine Foods & Pharmaceuticals N.T.M stock has a trailing yield of around 1.4% on the current share price of €8.74. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Fine Foods & Pharmaceuticals N.T.M

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. Fine Foods & Pharmaceuticals N.T.M's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If Fine Foods & Pharmaceuticals N.T.M didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. Fortunately, it paid out only 28% of its free cash flow in the past year.

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

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fine Foods & Pharmaceuticals N.T.M was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, five years ago, Fine Foods & Pharmaceuticals N.T.M has lifted its dividend by approximately 3.7% a year on average.

We update our analysis on Fine Foods & Pharmaceuticals N.T.M every 24 hours, so you can always get the latest insights on its financial health, here.

Final Takeaway

Is Fine Foods & Pharmaceuticals N.T.M worth buying for its dividend? We're a bit uncomfortable with it paying a dividend while being loss-making. However, we note that the dividend was covered by cash flow. It's not that we think Fine Foods & Pharmaceuticals N.T.M is a bad company, but these characteristics don't generally lead to outstanding dividend performance.

Ever wonder what the future holds for Fine Foods & Pharmaceuticals N.T.M? See what the two analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

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.