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It Might Not Be A Great Idea To Buy Bergbahnen Engelberg-Trübsee-Titlis AG (VTX:TIBN) For Its Next Dividend

Simply Wall St

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 Bergbahnen Engelberg-Trübsee-Titlis AG (VTX:TIBN) is about to go ex-dividend in just 4 days. If you purchase the stock on or after the 31st of March, you won't be eligible to receive this dividend, when it is paid on the 2nd of April.

Bergbahnen Engelberg-Trübsee-Titlis's next dividend payment will be CHF9.40 per share, on the back of last year when the company paid a total of CHF9.40 to shareholders. Based on the last year's worth of payments, Bergbahnen Engelberg-Trübsee-Titlis stock has a trailing yield of around 3.6% on the current share price of CHF260. 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! As a result, readers should always check whether Bergbahnen Engelberg-Trübsee-Titlis has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Bergbahnen Engelberg-Trübsee-Titlis

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. Bergbahnen Engelberg-Trübsee-Titlis paid out a comfortable 47% of its profit last year. A useful secondary check can be to evaluate whether Bergbahnen Engelberg-Trübsee-Titlis generated enough free cash flow to afford its dividend. Bergbahnen Engelberg-Trübsee-Titlis paid out more free cash flow than it generated - 124%, to be precise - last year, which we think is concerningly high. We're curious about why the company paid out more cash than it generated last year, since this can be one of the early signs that a dividend may be unsustainable.

Bergbahnen Engelberg-Trübsee-Titlis paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Cash is king, as they say, and were Bergbahnen Engelberg-Trübsee-Titlis to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

Click here to see how much of its profit Bergbahnen Engelberg-Trübsee-Titlis paid out over the last 12 months.

SWX:TIBN Historical Dividend Yield March 26th 2020

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're discomforted by Bergbahnen Engelberg-Trübsee-Titlis's 11% per annum decline in earnings in the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Bergbahnen Engelberg-Trübsee-Titlis has delivered 9.6% dividend growth per year on average over the past ten years.

To Sum It Up

Is Bergbahnen Engelberg-Trübsee-Titlis worth buying for its dividend? Bergbahnen Engelberg-Trübsee-Titlis's earnings per share have fallen noticeably and, although it paid out less than half its profit as dividends last year, it paid out a disconcertingly high percentage of its cashflow, which is not a great combination. Overall it doesn't look like the most suitable dividend stock for a long-term buy and hold investor.

With that being said, if you're still considering Bergbahnen Engelberg-Trübsee-Titlis as an investment, you'll find it beneficial to know what risks this stock is facing. To help with this, we've discovered 3 warning signs for Bergbahnen Engelberg-Trübsee-Titlis (1 is potentially serious!) that you ought to be aware of before buying the shares.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising 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 editorial-team@simplywallst.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.

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. Thank you for reading.