Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Beter Bed Holding N.V. (AMS:BBED) is about to trade ex-dividend in the next 3 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Thus, you can purchase Beter Bed Holding's shares before the 13th of May in order to receive the dividend, which the company will pay on the 23rd of May.
The company's next dividend payment will be €0.15 per share, and in the last 12 months, the company paid a total of €0.15 per share. Based on the last year's worth of payments, Beter Bed Holding has a trailing yield of 3.2% on the current stock price of €4.715. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.
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. That's why it's good to see Beter Bed Holding paying out a modest 32% of its earnings.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Beter Bed Holding's earnings per share have fallen at approximately 12% a year over the previous five years. Such a sharp decline casts doubt on the future sustainability of the dividend.
Beter Bed Holding also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. It's hard to grow dividends per share when a company keeps creating new shares.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Beter Bed Holding has seen its dividend decline 19% per annum on average over the past 10 years, which is not great to see. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.
Has Beter Bed Holding got what it takes to maintain its dividend payments? Beter Bed Holding's earnings per share are down over the past five years, although it has the cushion of a low payout ratio, which would suggest a cut to the dividend is relatively unlikely. In summary, Beter Bed Holding appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
On that note, you'll want to research what risks Beter Bed Holding is facing. Our analysis shows 2 warning signs for Beter Bed Holding and you should be aware of them before buying any 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.
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.