Wolters Kluwer N.V. (AMS:WKL) Looks Interesting, And It's About To Pay A Dividend

It looks like Wolters Kluwer N.V. (AMS:WKL) is about to go ex-dividend in the next three days. The ex-dividend date is usually set to be one business day 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 important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, Wolters Kluwer investors that purchase the stock on or after the 27th of August will not receive the dividend, which will be paid on the 19th of September.

The company's next dividend payment will be €0.83 per share, on the back of last year when the company paid a total of €2.08 to shareholders. Looking at the last 12 months of distributions, Wolters Kluwer has a trailing yield of approximately 1.4% on its current stock price of €151.10. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for Wolters Kluwer

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Wolters Kluwer paid out more than half (51%) of its earnings last year, which is a regular payout ratio for most companies. 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. Fortunately, it paid out only 42% of its free cash flow in the past 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?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. For this reason, we're glad to see Wolters Kluwer's earnings per share have risen 13% per annum over the last five years. Wolters Kluwer is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. This is a reasonable combination that could hint at some further dividend increases in the future.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Wolters Kluwer has increased its dividend at approximately 12% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

The Bottom Line

Should investors buy Wolters Kluwer for the upcoming dividend? We like Wolters Kluwer's growing earnings per share and the fact that - while its payout ratio is around average - it paid out a lower percentage of its cash flow. Wolters Kluwer looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

In light of that, while Wolters Kluwer has an appealing dividend, it's worth knowing the risks involved with this stock. To help with this, we've discovered 1 warning sign for Wolters Kluwer that you should be aware of before investing in their shares.

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.