Is It Worth Considering Datalogic S.p.A. (BIT:DAL) For Its Upcoming Dividend?

Datalogic S.p.A. (BIT:DAL) stock is about to trade ex-dividend in 3 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Meaning, you will need to purchase Datalogic's shares before the 15th of July to receive the dividend, which will be paid on the 17th of July.

The company's upcoming dividend is €0.12 a share, following on from the last 12 months, when the company distributed a total of €0.12 per share to shareholders. Based on the last year's worth of payments, Datalogic has a trailing yield of 2.2% on the current stock price of €5.52. If you buy this business for its dividend, you should have an idea of whether Datalogic's dividend is reliable and sustainable. As a result, readers should always check whether Datalogic has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Datalogic

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Datalogic paid out a comfortable 48% of its profit last year. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Over the last year it paid out 68% of its free cash flow as dividends, within the usual range for most companies.

It's positive to see that Datalogic'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 shrinking earnings are tricky from a dividend perspective. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Readers will understand then, why we're concerned to see Datalogic's earnings per share have dropped 25% a year over the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Datalogic has seen its dividend decline 2.8% per annum on average over the past 10 years, which is not great to see. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

To Sum It Up

From a dividend perspective, should investors buy or avoid Datalogic? Earnings per share have fallen significantly, although at least Datalogic paid out less than half of its profits and free cash flow over the last year, leaving some margin of safety. Overall, it's hard to get excited about Datalogic from a dividend perspective.

So if you want to do more digging on Datalogic, you'll find it worthwhile knowing the risks that this stock faces. To help with this, we've discovered 2 warning signs for Datalogic that you should be aware of before investing in their shares.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com