A2A (BIT:A2A) Could Be A Buy For Its Upcoming Dividend

By
Simply Wall St
Published
May 18, 2021
BIT:A2A
Source: Shutterstock

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that A2A S.p.A. (BIT:A2A) is about to go ex-dividend in just four days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a 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. Accordingly, A2A investors that purchase the stock on or after the 24th of May will not receive the dividend, which will be paid on the 26th of May.

The company's next dividend payment will be €0.08 per share, on the back of last year when the company paid a total of €0.08 to shareholders. Looking at the last 12 months of distributions, A2A has a trailing yield of approximately 4.6% on its current stock price of €1.729. 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 A2A has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for A2A

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. A2A paid out 68% of its earnings to investors last year, a normal payout level for most businesses. A2A paid a dividend despite reporting negative free cash flow last year. That's typically a bad combination and - if this were more than a one-off - not sustainable.

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

historic-dividend
BIT:A2A Historic Dividend May 19th 2021

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 A2A has grown its earnings rapidly, up 38% a year for the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. A2A has delivered 1.3% dividend growth per year on average over the past 10 years. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

To Sum It Up

Is A2A worth buying for its dividend? Earnings per share are growing at an attractive rate, and A2A is paying out a bit over half its profits. Overall, A2A looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

So while A2A looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Be aware that A2A is showing 2 warning signs in our investment analysis, and 1 of those is a bit concerning...

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

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