Don't Buy Aeroporto Guglielmo Marconi di Bologna S.p.A. (BIT:ADB) For Its Next Dividend Without Doing These Checks

Readers hoping to buy Aeroporto Guglielmo Marconi di Bologna S.p.A. (BIT:ADB) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase Aeroporto Guglielmo Marconi di Bologna's shares on or after the 12th of May, you won't be eligible to receive the dividend, when it is paid on the 14th of May.

The company's next dividend payment will be €0.471 per share. Last year, in total, the company distributed €0.47 to shareholders. Based on the last year's worth of payments, Aeroporto Guglielmo Marconi di Bologna has a trailing yield of 5.5% on the current stock price of €8.50. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether Aeroporto Guglielmo Marconi di Bologna 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. Aeroporto Guglielmo Marconi di Bologna is paying out an acceptable 70% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether Aeroporto Guglielmo Marconi di Bologna generated enough free cash flow to afford its dividend. Over the last year, it paid out dividends equivalent to 221% of what it generated in free cash flow, a disturbingly high percentage. It's pretty hard to pay out more than you earn, so we wonder how Aeroporto Guglielmo Marconi di Bologna intends to continue funding this dividend, or if it could be forced to cut the payment.

While Aeroporto Guglielmo Marconi di Bologna's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Cash is king, as they say, and were Aeroporto Guglielmo Marconi di Bologna to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

Check out our latest analysis for Aeroporto Guglielmo Marconi di Bologna

Click here to see how much of its profit Aeroporto Guglielmo Marconi di Bologna paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Aeroporto Guglielmo Marconi di Bologna earnings per share are up 3.2% per annum over the last five years. Earnings have been growing somewhat, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Aeroporto Guglielmo Marconi di Bologna has delivered 12% dividend growth per year on average over the past nine years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

To Sum It Up

From a dividend perspective, should investors buy or avoid Aeroporto Guglielmo Marconi di Bologna? Aeroporto Guglielmo Marconi di Bologna is paying out a reasonable percentage of its income and an uncomfortably high 221% of its cash flow as dividends. At least earnings per share have been growing steadily. It's not an attractive combination from a dividend perspective, and we're inclined to pass on this one for the time being.

Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with Aeroporto Guglielmo Marconi di Bologna. Our analysis shows 2 warning signs for Aeroporto Guglielmo Marconi di Bologna that we strongly recommend you have a look at before investing in the company.

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.