It looks like Renta 4 Banco, S.A. (BME:R4) is about to go ex-dividend in the next 3 days. You can purchase shares before the 21st of November in order to receive the dividend, which the company will pay on the 26th of November.
Renta 4 Banco's upcoming dividend is €0.16 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 Renta 4 Banco has a trailing yield of 4.2% on the current share price of €7.16. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.
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. Its dividend payout ratio is 88% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth We'd be concerned if earnings began to decline.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
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. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Renta 4 Banco, with earnings per share up 3.8% on average over the last five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last ten years, Renta 4 Banco has lifted its dividend by approximately 12% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
From a dividend perspective, should investors buy or avoid Renta 4 Banco? Renta 4 Banco has been generating some growth in earnings per share while paying out more than half of its earnings to shareholders in the form of dividends. At best we would put it on a watch-list to see if business conditions improve, as it doesn't look like a clear opportunity right now.
Keen to explore more data on Renta 4 Banco'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.
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