Be sure to check out B&M European Value Retail SA (LON:BME) before it goes ex-dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it is exciting to see B&M European Value Retail SA (LON:BME) will trade ex-dividend for the next 3 days. The ex-dividend date is normally one business day before the record date, which is the date by which you as a shareholder must be registered in the company’s books to receive the dividend. The ex-dividend date is important because trading takes at least two business days whenever a share is bought or sold. Accordingly, B&M European Value Retail investors who buy the stock on or after June 27th will not receive the dividend, which is paid on August 2nd.

The company’s next dividend payment will be GBP0.096 per share, following on from last year’s total dividend payout of GBP0.35 to shareholders. Last year’s total dividend payments show that B&M European Value Retail has a trailing yield of 7.4% on the current share price of GBP4.69. If you are buying this company for its dividend, you should have an idea of ​​whether B&M European Value Retail’s dividend is reliable and sustainable. We need to see if the dividend is covered by earnings, and if it is growing.

Check out our latest analysis for B&M European Value Retail

Dividends are typically paid out of company profits, so if a company pays out more than it earns, there is usually a higher risk of a dividend cut. Fortunately, B&M European Value Retail’s payout ratio is modest at just 40% of profits. A useful second check can be to evaluate whether B&M European Value Retail generated enough free cash flow to afford the dividend. On the positive side, dividends were well covered by free cash flow, with the company paying out 24% of its cash flow last year.

It’s positive to see that B&M European Value Retail’s dividend is covered by both profits and cash flow, as this is generally a sign that the dividend is sustainable, and a lower payout ratio usually indicates a greater margin of safety before the dividend gets cut.

Click here to see the company’s payout ratio as well as analyst estimates of its future dividends.

Have earnings and dividends increased?

Companies with consistently growing earnings per share generally make the best dividend stocks because they usually have an easier time increasing dividends per share. Investors love dividends, so when earnings fall and the dividend is cut, expect a stock to be sold off massively at the same time. For this reason, we’re pleased to see B&M European Value Retail’s earnings per share grow 13% annually over the past five years. Earnings per share have grown quickly, and the company keeps most of its profits in the business. Fast-growing companies that reinvest heavily are tempting from a dividend perspective, especially since they can often increase the payout ratio later on.

The story goes on

Many investors judge a company’s dividend performance by looking at how dividend payments have changed over time. B&M European Value Retail has increased its dividend by an average of 34% per year over the past 10 years. Both earnings per share and dividends have risen sharply recently, which is encouraging.

Summarize something

Is B&M European Value Retail an attractive dividend stock or should you avoid it? It’s great that B&M European Value Retail is growing earnings per share while paying out a low percentage of its profit and cash flow. It’s disappointing that 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. B&M European Value Retail has a lot of good things going for it, and we’d prefer to take a closer look.

With this in mind, an important part of a thorough stock analysis is to be aware of the risks a stock is currently facing. For example, B&M European Value Retail 2 warning signs In our opinion, you should be aware of this.

In general, we would not recommend simply buying the first dividend stock you see. Here is a curated list of interesting stocks with high dividend numbers.

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This Simply Wall St article is of a general nature. We comment based solely on historical data and analyst forecasts, using an unbiased methodology. Our articles do not constitute financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. Our goal is to provide you with long-term analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative materials. Simply Wall St does not hold any of the stocks mentioned.

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