There's A Lot To Like About FNM's (BIT:FNM) Upcoming €0.023 Dividend

It looks like FNM S.p.A. (BIT:FNM) is about to go ex-dividend in the next three 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 FNM'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 €0.023 per share, on the back of last year when the company paid a total of €0.023 to shareholders. Last year's total dividend payments show that FNM has a trailing yield of 4.6% on the current share price of €0.496. 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 FNM has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for FNM

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. FNM has a low and conservative payout ratio of just 12% of its income after tax. 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. The good news is it paid out just 7.4% of its free cash flow in the last year.

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 the company's payout ratio, plus analyst estimates of its future dividends.

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. That's why it's comforting to see FNM's earnings have been skyrocketing, up 23% per annum for the past five years. FNM 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.'

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, FNM has lifted its dividend by approximately 5.9% a year on average. Earnings per share have been growing much quicker than dividends, potentially because FNM is keeping back more of its profits to grow the business.

Final Takeaway

Is FNM worth buying for its dividend? It's great that FNM is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. FNM looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

In light of that, while FNM has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 3 warning signs for FNM (2 are significant!) that deserve your attention before investing in the 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.