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IFA Hotel & Touristik Aktiengesellschaft (FRA:IFA) is about to trade ex-dividend in the next 3 days. Ex-dividend means that investors that purchase the stock on or after the 19th of July will not receive this dividend, which will be paid on the 23rd of July.
IFA Hotel & Touristik's upcoming dividend is €0.12 a share, following on from the last 12 months, when the company distributed a total of €0.12 per share to shareholders. Calculating the last year's worth of payments shows that IFA Hotel & Touristik has a trailing yield of 1.7% on the current share price of €7. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.
Check out our latest analysis for IFA Hotel & Touristik
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. IFA Hotel & Touristik is paying out just 8.7% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. A useful secondary check can be to evaluate whether IFA Hotel & Touristik generated enough free cash flow to afford its dividend.
It's positive to see that IFA Hotel & Touristik'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 IFA Hotel & Touristik 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see IFA Hotel & Touristik earnings per share are up 9.4% per annum over the last five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. IFA Hotel & Touristik has seen its dividend decline 8.2% per annum on average over the past 6 years, which is not great to see. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.