Only Four Days Left To Cash In On Deufol's (HMSE:DE10) Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Deufol SE (HMSE:DE10) is about to trade ex-dividend in the next 4 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Accordingly, Deufol investors that purchase the stock on or after the 27th of June will not receive the dividend, which will be paid on the 1st of July.
The company's next dividend payment will be €0.30 per share, and in the last 12 months, the company paid a total of €0.30 per share. Based on the last year's worth of payments, Deufol has a trailing yield of 5.2% on the current stock price of €5.75. If you buy this business for its dividend, you should have an idea of whether Deufol's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
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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. Deufol paid out more than half (65%) of its earnings last year, which is a regular payout ratio for most companies. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. The good news is it paid out just 24% of its free cash flow in the last year.
It's positive to see that Deufol'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.
See our latest analysis for Deufol
Click here to see how much of its profit Deufol paid out over the last 12 months.
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Deufol earnings per share are up 6.0% per annum over the last five years. Decent historical earnings per share growth suggests Deufol has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Deufol's dividend payments are broadly unchanged compared to where they were seven years ago.
Is Deufol worth buying for its dividend? Earnings per share growth has been modest and Deufol paid out over half of its profits and less than half of its free cash flow, although both payout ratios are within normal limits. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Deufol's dividend merits.
On that note, you'll want to research what risks Deufol is facing. Every company has risks, and we've spotted 4 warning signs for Deufol you should know about.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.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.
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