Should You Buy Convergenze S.p.A. Società Benefit (BIT:CVG) For Its Upcoming Dividend?

It looks like Convergenze S.p.A. Società Benefit (BIT:CVG) is about to go ex-dividend in the next 3 days. The ex-dividend date is usually set to be two business days 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. 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 Convergenze. Società Benefit's shares on or after the 2nd of June, you won't be eligible to receive the dividend, when it is paid on the 4th of June.

The company's next dividend payment will be €0.02 per share, on the back of last year when the company paid a total of €0.02 to shareholders. Based on the last year's worth of payments, Convergenze. Società Benefit has a trailing yield of 1.0% on the current stock price of €1.94. If you buy this business for its dividend, you should have an idea of whether Convergenze. Società Benefit's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

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. Convergenze. Società Benefit has a low and conservative payout ratio of just 12% of its income after tax. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Luckily it paid out just 17% of its free cash flow last year.

It's positive to see that Convergenze. Società Benefit'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.

See our latest analysis for Convergenze. Società Benefit

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

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Convergenze. Società Benefit has grown its earnings rapidly, up 72% a year for the past five years. Convergenze. Società Benefit earnings per share have been sprinting ahead like the Road Runner at a track and field day; scarcely stopping even for a cheeky "beep-beep". We also like that it is reinvesting most of its profits in its business.'

Unfortunately Convergenze. Società Benefit has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

Final Takeaway

Has Convergenze. Società Benefit got what it takes to maintain its dividend payments? We love that Convergenze. Società Benefit is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. It's a promising combination that should mark this company worthy of closer attention.

On that note, you'll want to research what risks Convergenze. Società Benefit is facing. For example - Convergenze. Società Benefit has 2 warning signs we think you should be aware of.

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.