Here's Why We're Wary Of Buying Deutsche Beteiligungs' (ETR:DBAN) For Its Upcoming Dividend
Deutsche Beteiligungs AG (ETR:DBAN) stock is about to trade ex-dividend in 2 days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. This means that investors who purchase Deutsche Beteiligungs' shares on or after the 28th of May will not receive the dividend, which will be paid on the 30th of May.
The company's next dividend payment will be €1.25 per share, on the back of last year when the company paid a total of €1.00 to shareholders. Calculating the last year's worth of payments shows that Deutsche Beteiligungs has a trailing yield of 3.8% on the current share price of €26.00. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.
We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.
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. Deutsche Beteiligungs reported a loss last year, so it's not great to see that it has continued paying a dividend. Deutsche Beteiligungs paid a dividend despite reporting negative free cash flow last year. That's typically a bad combination and - if this were more than a one-off - not sustainable.
View our latest analysis for Deutsche Beteiligungs
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. Deutsche Beteiligungs 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.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Deutsche Beteiligungs's dividend payments per share have declined at 6.7% per year on average over the past 10 years, which is uninspiring. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.
Get our latest analysis on Deutsche Beteiligungs's balance sheet health here.
Should investors buy Deutsche Beteiligungs for the upcoming dividend? It's hard to get past the idea of Deutsche Beteiligungs paying a dividend despite reporting a loss over the past year - especially when the general trend in its earnings also looks to be negative. This is not an overtly appealing combination of characteristics, and we're just not that interested in this company's dividend.
Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with Deutsche Beteiligungs. In terms of investment risks, we've identified 2 warning signs with Deutsche Beteiligungs and understanding them should be part of your investment process.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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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