Turbomecanica SA (BVB:TBM) Stock Goes Ex-Dividend In Just Three Days

Turbomecanica SA (BVB:TBM) stock is about to trade ex-dividend in three days. The ex-dividend date occurs one day 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. Thus, you can purchase Turbomecanica's shares before the 9th of October in order to receive the dividend, which the company will pay on the 25th of October.

The company's next dividend payment will be RON0.023 per share, and in the last 12 months, the company paid a total of RON0.023 per share. Last year's total dividend payments show that Turbomecanica has a trailing yield of 7.1% on the current share price of RON0.326. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Turbomecanica

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Turbomecanica paid out more than half (69%) of its earnings last year, which is a regular payout ratio for most companies. 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. What's good is that dividends were well covered by free cash flow, with the company paying out 23% of its cash flow last year.

It's positive to see that Turbomecanica'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 how much of its profit Turbomecanica paid out over the last 12 months.

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 Turbomecanica earnings per share are up 5.2% per annum over the last five years. While earnings have been growing at a credible rate, the company is paying out a majority of its earnings to shareholders. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.

Unfortunately Turbomecanica has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

The Bottom Line

Is Turbomecanica worth buying for its dividend? While earnings per share growth has been modest, Turbomecanica's dividend payouts are around an average level; without a sharp change in earnings we feel that the dividend is likely somewhat sustainable. Pleasingly the company paid out a conservatively low percentage of its free cash flow. In summary, it's hard to get excited about Turbomecanica from a dividend perspective.

While it's tempting to invest in Turbomecanica for the dividends alone, you should always be mindful of the risks involved. We've identified 3 warning signs with Turbomecanica (at least 1 which makes us a bit uncomfortable), and understanding them should be part of your investment process.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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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.