In This Article:
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see United Internet AG (ETR:UTDI) is about to trade ex-dividend in the next four days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Accordingly, United Internet investors that purchase the stock on or after the 16th of May will not receive the dividend, which will be paid on the 20th of May.
The company's next dividend payment will be €1.90 per share, and in the last 12 months, the company paid a total of €0.40 per share. Based on the last year's worth of payments, United Internet stock has a trailing yield of around 1.9% on the current share price of €21.04. If you buy this business for its dividend, you should have an idea of whether United Internet's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. United Internet paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If United Internet didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. Fortunately, it paid out only 48% of its free cash flow in the past year.
View our latest analysis for United Internet
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. United Internet reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.