Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
Readers hoping to buy FACC AG (VIE:FACC) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. You will need to purchase shares before the 15th of July to receive the dividend, which will be paid on the 17th of July.
FACC's upcoming dividend is €0.15 a share, following on from the last 12 months, when the company distributed a total of €0.15 per share to shareholders. Based on the last year's worth of payments, FACC has a trailing yield of 1.5% on the current stock price of €10.22. If you buy this business for its dividend, you should have an idea of whether FACC's dividend is reliable and sustainable. So we need to investigate whether FACC 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. FACC has a low and conservative payout ratio of just 23% of its income after tax. 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. Luckily it paid out just 19% of its free cash flow last year.
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 shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. FACC's earnings per share have fallen at approximately 7.2% a year over the previous 5 years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.
Unfortunately FACC has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.
To Sum It Up
Is FACC an attractive dividend stock, or better left on the shelf? FACC has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.
Wondering what the future holds for FACC? See what the four analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
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 firstname.lastname@example.org. 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.