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Readers hoping to buy KSB SE & Co. KGaA (ETR:KSB) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is usually set to be two business days 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 because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. This means that investors who purchase KSB SE KGaA's shares on or after the 9th of May will not receive the dividend, which will be paid on the 13th of May.
The company's next dividend payment will be €26.50 per share, and in the last 12 months, the company paid a total of €26.50 per share. Last year's total dividend payments show that KSB SE KGaA has a trailing yield of 3.1% on the current share price of €845.00. If you buy this business for its dividend, you should have an idea of whether KSB SE KGaA's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
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Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fortunately KSB SE KGaA's payout ratio is modest, at just 39% of profit. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It distributed 34% of its free cash flow as dividends, a comfortable payout level for most companies.
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 KSB SE KGaA
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. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see KSB SE KGaA's earnings have been skyrocketing, up 22% per annum for the past five years. KSB SE KGaA is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.