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Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Nucletron Electronic Aktiengesellschaft (FRA:NUC) is about to trade ex-dividend in the next 2 days. Ex-dividend means that investors that purchase the stock on or after the 15th of July will not receive this dividend, which will be paid on the 17th of July.
Nucletron Electronic's upcoming dividend is €0.30 a share, following on from the last 12 months, when the company distributed a total of €0.30 per share to shareholders. Last year's total dividend payments show that Nucletron Electronic has a trailing yield of 5.4% on the current share price of €5.55. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Nucletron Electronic can afford its dividend, and if the dividend could grow.
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. Nucletron Electronic paid out 63% of its earnings to investors last year, a normal payout level for most businesses. 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. Thankfully its dividend payments took up just 41% of the free cash flow it generated, which is a comfortable payout ratio.
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.
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. Fortunately for readers, Nucletron Electronic's earnings per share have been growing at 15% a year for the past five years.
Nucletron Electronic has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. This is a reasonable combination that could hint at some further dividend increases in the future.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Nucletron Electronic has lifted its dividend by approximately 0.7% a year on average. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.
Is Nucletron Electronic worth buying for its dividend? We like Nucletron Electronic's growing earnings per share and the fact that - while its payout ratio is around average - it paid out a lower percentage of its cash flow. Nucletron Electronic looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
Keen to explore more data on Nucletron Electronic's financial performance? Check out our visualisation of its historical revenue and earnings growth.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.