Regular readers know that we love Simply Wall Street Dividends. Data module Aktiengesellschaft, Produktion und Vertrieb von elektronischen Systemen (ETR:DAM) is scheduled to trade ex-dividend in the next three days. The ex-dividend date is one business day before the company's record date, which is the date on which the company determines which shareholders are entitled to receive the dividend. The ex-dividend date is important because trades in the stock must be settled before the record date in order to receive the dividend. Therefore, an investor in DATA MODUL Produktion und Vertrieb von elektronischen Systemen who purchased shares after May 9th will not receive the dividend, which he will be paid on May 13th.
The company's upcoming dividend is EUR 2.00 per share, continuing the previous 12 months, when it distributed a total of EUR 2.00 per share to shareholders. Looking at the last 12 months of distributions, DATA MODUL Produktion und Vertrieb von elektronischen Systemen has a yield of approximately 5.9% on the current share price of EUR 34.00. If you buy this business for its dividend, you need to understand whether DATA MODUL Produktion und Vertrieb von elektronischen Systemen's dividend is reliable and sustainable. So we need to investigate whether DATA MODUL Produktion und Vertrieb von elektronischen Systemen can afford its dividend, and if the dividend could grow.
Check out our latest analysis for DATA MODUL Produktion und Vertrieb von elektronischen Systemen.
Dividends are typically paid out of company profits, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. DATA MODUL Produktion und Vertrieb von elektronischen Systemen paid out a comfortable 49% of its profit last year. A useful secondary check is to assess whether DATA MODUL Produktion und Vertrieb von elektronischen Systemen generated enough free cash flow to pay its dividend. Happily, the company paid out just 2.8% of its free cash flow last year.
It's reassuring 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.
Click here to see how much profit DATA MODUL Produktion und Vertrieb von elektronischen Systemen paid out in the last 12 months.
Are profits and dividends growing?
Stocks with flat earnings may still have attractive dividends, but it's important to be more conservative in your approach and demand a greater margin of safety when it comes to dividend sustainability. If profits decline significantly, the company may be forced to cut its dividend. With that in mind, we're not happy to see that DATA MODUL Produktion und Vertrieb von elektronischen Systemen's earnings per share have remained essentially flat over the past five years. Declining earnings are always acceptable, but over the long term, all the best dividend stocks grow their earnings per share. Recent growth has not been impressive. However, companies that determine that growth is slowing can often choose to pay out a higher percentage of their profits to shareholders, in which case dividends may continue to grow.
The main way most investors assess a company's dividend prospects is by looking at its historical dividend growth rate. DATA MODUL Produktion und Vertrieb von elektronischen Systemen has delivered an average dividend growth of 13% per year over the past 10 years.
final point
Is DATA MODUL Produktion und Vertrieb von elektronischen Systemen an attractive dividend stock, or should it be left on the shelf? Over this period, earnings per share have been flat, but DATA MODUL Produktion und Vertrieb von elektronischen Systemen has been profitable. We find it interesting that it pays out less than half of its cash flow as dividends. This is interesting for a number of reasons, as it suggests management may be reinvesting heavily in the business, while also giving it scope to increase the dividend. We want earnings to grow faster, but the best dividend stocks over the long term typically combine high growth in earnings per share with a low payout ratio, making DATA MODUL Produktion und Vertrieb von elektronischen Systemen is somewhere in between. Overall, we believe this is an attractive combination and worthy of further study.
While it may be attractive to invest in DATA MODUL Produktion und Vertrieb von elektronischen Systemen solely for its dividend, you should always be aware of the risks involved. For example, DATA MODUL Produktion und Vertrieb von elektronischen Systemen has 1 warning sign I think you should know.
If you're in the market looking for high dividends, we recommend: Check out our selection of high-dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary using only unbiased methodologies, based on historical data and analyst forecasts, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.