It looks like Amadeus IT Group, S.A. (BME:AMS) is about to go ex-dividend in the next 3 days. Investors can purchase shares before the 15th of January in order to be eligible for this dividend, which will be paid on the 17th of January.
Amadeus IT Group's next dividend payment will be €0.45 per share, and in the last 12 months, the company paid a total of €1.18 per share. Looking at the last 12 months of distributions, Amadeus IT Group has a trailing yield of approximately 1.6% on its current stock price of €74.12. If you buy this business for its dividend, you should have an idea of whether Amadeus IT Group's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Amadeus IT Group paying out a modest 26% of its earnings. A useful secondary check can be to evaluate whether Amadeus IT Group generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 21% of its cash flow last year.
It's positive to see that Amadeus IT Group's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. For this reason, we're glad to see Amadeus IT Group's earnings per share have risen 15% per annum over the last five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. 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. In the past nine years, Amadeus IT Group has increased its dividend at approximately 16% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
The Bottom Line
From a dividend perspective, should investors buy or avoid Amadeus IT Group? Amadeus IT Group has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. Amadeus IT Group looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
Curious what other investors think of Amadeus IT Group? See what analysts 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.
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.
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