Huber+Suhner AG (VTX:HUBN) Pays A CHF01.70 Dividend In Just Three Days
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 Huber+Suhner AG (VTX:HUBN) is about to go ex-dividend in just 3 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Therefore, if you purchase Huber+Suhner's shares on or after the 2nd of April, you won't be eligible to receive the dividend, when it is paid on the 4th of April.
The company's next dividend payment will be CHF01.70 per share, and in the last 12 months, the company paid a total of CHF1.70 per share. Based on the last year's worth of payments, Huber+Suhner stock has a trailing yield of around 2.2% on the current share price of CHF076.20. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.
See our latest analysis for Huber+Suhner
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Fortunately Huber+Suhner's payout ratio is modest, at just 49% of profit. A useful secondary check can be to evaluate whether Huber+Suhner generated enough free cash flow to afford its dividend. Over the last year it paid out 61% of its free cash flow as dividends, within the usual range for most companies.
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.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That explains why we're not overly excited about Huber+Suhner's flat earnings over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share. Earnings growth has been slim and the company is paying out more than half of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Huber+Suhner has increased its dividend at approximately 7.8% a year on average.
The Bottom Line
Should investors buy Huber+Suhner for the upcoming dividend? Earnings per share have been flat over the 10-year timeframe we consider, and Huber+Suhner paid out less than half its earnings and more than half its free cashflow over the last year. All things considered, we are not particularly enthused about Huber+Suhner from a dividend perspective.
While it's tempting to invest in Huber+Suhner for the dividends alone, you should always be mindful of the risks involved. In terms of investment risks, we've identified 1 warning sign with Huber+Suhner and understanding them should be part of your investment process.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
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.
