In This Article:
It looks like Bilfinger SE (ETR:GBF) is about to go ex-dividend in the next four days. Typically, the ex-dividend date is two business days 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 as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. This means that investors who purchase Bilfinger's shares on or after the 15th of May will not receive the dividend, which will be paid on the 19th of May.
The company's next dividend payment will be €2.40 per share, on the back of last year when the company paid a total of €2.40 to shareholders. Looking at the last 12 months of distributions, Bilfinger has a trailing yield of approximately 3.2% on its current stock price of €76.00. If you buy this business for its dividend, you should have an idea of whether Bilfinger's dividend is reliable and sustainable. So we need to investigate whether Bilfinger can afford its dividend, and if the dividend could grow.
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. Bilfinger paid out 51% of its earnings to investors last year, a normal payout level for most businesses. 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. Fortunately, it paid out only 38% 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.
Check out our latest analysis for Bilfinger
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Bilfinger has grown its earnings rapidly, up 217% a year for the past five years. The current payout ratio suggests a good balance between rewarding shareholders with dividends, and reinvesting in growth. With a reasonable payout ratio, profits being reinvested, and some earnings growth, Bilfinger could have strong prospects for future increases to the dividend.