Jerónimo Martins, SGPS, S.A. (ELI:JMT) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

Jerónimo Martins, SGPS, S.A. (ELI:JMT) is about to trade ex-dividend in the next four 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, Jerónimo Martins SGPS investors that purchase the stock on or after the 13th of May will not receive the dividend, which will be paid on the 15th of May.

The company's next dividend payment will be €0.655 per share, on the back of last year when the company paid a total of €0.66 to shareholders. Last year's total dividend payments show that Jerónimo Martins SGPS has a trailing yield of 3.3% on the current share price of €19.60. 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 Jerónimo Martins SGPS has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Jerónimo Martins SGPS

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. Jerónimo Martins SGPS paid out more than half (58%) of its earnings last year, which is a regular payout ratio for most companies. A useful secondary check can be to evaluate whether Jerónimo Martins SGPS generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 37% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that Jerónimo Martins SGPS's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

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. Fortunately for readers, Jerónimo Martins SGPS's earnings per share have been growing at 12% a year for the past five years. Jerónimo Martins SGPS has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. This is a reasonable combination that could hint at some further dividend increases in the future.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, Jerónimo Martins SGPS has lifted its dividend by approximately 7.9% 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.

The Bottom Line

Should investors buy Jerónimo Martins SGPS for the upcoming dividend? We like Jerónimo Martins SGPS'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. It's a promising combination that should mark this company worthy of closer attention.

So while Jerónimo Martins SGPS looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Every company has risks, and we've spotted 1 warning sign for Jerónimo Martins SGPS you should know about.

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.