Income Investors Should Know That ACEA S.p.A. (BIT:ACE) Goes Ex-Dividend Soon

ACEA S.p.A. (BIT:ACE) is about to trade ex-dividend in the next 3 days. The ex-dividend date generally occurs two days 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, ACEA investors that purchase the stock on or after the 23rd of June will not receive the dividend, which will be paid on the 25th of June.

The company's upcoming dividend is €0.95 a share, following on from the last 12 months, when the company distributed a total of €0.95 per share to shareholders. Based on the last year's worth of payments, ACEA stock has a trailing yield of around 4.4% on the current share price of €21.40. If you buy this business for its dividend, you should have an idea of whether ACEA'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.

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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. ACEA paid out 58% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out 77% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.

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.

Check out our latest analysis for ACEA

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

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see ACEA earnings per share are up 4.1% per annum over the last five years. A high payout ratio of 58% generally happens when a company can't find better uses for the cash. Combined with slim earnings growth in the past few years, ACEA could be signalling that its future growth prospects are thin.

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, ACEA has lifted its dividend by approximately 7.8% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

Final Takeaway

Has ACEA got what it takes to maintain its dividend payments? Earnings per share have been growing modestly and ACEA paid out a bit over half of its earnings and free cash flow last year. Overall, it's hard to get excited about ACEA from a dividend perspective.

If you're not too concerned about ACEA's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. To help with this, we've discovered 2 warning signs for ACEA that you should be aware of before investing in their shares.

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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.