Here's What We Like About BasicNet's (BIT:BAN) Upcoming Dividend

Readers hoping to buy BasicNet S.p.A. (BIT:BAN) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. In other words, investors can purchase BasicNet's shares before the 22nd of April in order to be eligible for the dividend, which will be paid on the 24th of April.

The company's next dividend payment will be €0.15 per share, and in the last 12 months, the company paid a total of €0.15 per share. Calculating the last year's worth of payments shows that BasicNet has a trailing yield of 3.8% on the current share price of €3.97. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether BasicNet has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for BasicNet

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. BasicNet paid out a comfortable 31% of its profit last year. A useful secondary check can be to evaluate whether BasicNet generated enough free cash flow to afford its dividend. It distributed 31% 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.

Click here to see how much of its profit BasicNet 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. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at BasicNet, with earnings per share up 5.0% on average over the last five years. Earnings per share growth in recent times has not been a standout. Yet there are several ways to grow the dividend, and one of them is simply that the company may choose to pay out more of its earnings as dividends.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last nine years, BasicNet has lifted its dividend by approximately 8.8% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

Final Takeaway

Is BasicNet an attractive dividend stock, or better left on the shelf? Earnings per share growth has been growing somewhat, and BasicNet is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and BasicNet is halfway there. BasicNet looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

While it's tempting to invest in BasicNet for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 2 warning signs for BasicNet and you should be aware of these before buying any 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.