Be Sure To Check Out The Bidvest Group Limited (JSE:BVT) Before It Goes Ex-Dividend

Readers hoping to buy The Bidvest Group Limited (JSE:BVT) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Meaning, you will need to purchase Bidvest Group's shares before the 25th of September to receive the dividend, which will be paid on the 30th of September.

The company's next dividend payment will be R04.47 per share, on the back of last year when the company paid a total of R9.14 to shareholders. Looking at the last 12 months of distributions, Bidvest Group has a trailing yield of approximately 3.2% on its current stock price of R0284.00. 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.

See our latest analysis for Bidvest Group

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. That's why it's good to see Bidvest Group paying out a modest 49% of its earnings. 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 more than half (63%) of its free cash flow in the past year, which is within an average range for most companies.

It's positive to see that Bidvest Group'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?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. 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 Bidvest Group's earnings per share have risen 11% per annum over the last five years. Bidvest Group 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.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Bidvest Group's dividend payments are effectively flat on where they were 10 years ago.

To Sum It Up

Has Bidvest Group got what it takes to maintain its dividend payments? Earnings per share have grown at a nice rate in recent times and over the last year, Bidvest Group paid out less than half its earnings and a bit over half its free cash flow. There's a lot to like about Bidvest Group, and we would prioritise taking a closer look at it.

While it's tempting to invest in Bidvest Group for the dividends alone, you should always be mindful of the risks involved. Case in point: We've spotted 1 warning sign for Bidvest Group you should be aware of.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.