Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that IVU Traffic Technologies AG (ETR:IVU) is about to go ex-dividend in just 1 days. If you purchase the stock on or after the 29th of May, you won't be eligible to receive this dividend, when it is paid on the 3rd of June.
IVU Traffic Technologies's next dividend payment will be €0.16 per share. Last year, in total, the company distributed €0.16 to shareholders. Based on the last year's worth of payments, IVU Traffic Technologies has a trailing yield of 1.0% on the current stock price of €16. 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 IVU Traffic Technologies can afford its dividend, and if the dividend could grow.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That's why it's good to see IVU Traffic Technologies paying out a modest 27% of its earnings. 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?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, IVU Traffic Technologies's earnings per share have been growing at 19% a year for the past five years. Earnings per share are growing rapidly and the company is keeping more than half of its earnings within the business; an attractive combination which could suggest the company is focused on reinvesting to grow earnings further. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. IVU Traffic Technologies has delivered an average of 26% per year annual increase in its dividend, based on the past five years of dividend payments. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
Should investors buy IVU Traffic Technologies for the upcoming dividend? It's great that IVU Traffic Technologies is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. There's a lot to like about IVU Traffic Technologies, and we would prioritise taking a closer look at it.
So while IVU Traffic Technologies looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Case in point: We've spotted 1 warning sign for IVU Traffic Technologies you should be aware of.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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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. 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. Thank you for reading.