Yahoo Finance B&M European Value Retail S.A. (LON:BME) Looks Like A Good Stock, And It's Going Ex-Dividend Soon
B&M European Value Retail S.A. (LON:BME) stock is about to trade ex-dividend in 3 days. Ex-dividend means that investors that purchase the stock on or after the 14th of January will not receive this dividend, which will be paid on the 29th of January.
The upcoming dividend for B&M European Value Retail is UK£0.20 per share, increased from last year's total dividends per share of UK£0.081. 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.
Check out our latest analysis for B&M European Value Retail
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. That's why it's good to see B&M European Value Retail paying out a modest 33% of its earnings. A useful secondary check can be to evaluate whether B&M European Value Retail generated enough free cash flow to afford its dividend. Luckily it paid out just 12% of its free cash flow last year.
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?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see B&M European Value Retail's earnings have been skyrocketing, up 50% per annum for the past five years. B&M European Value Retail is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past six years, B&M European Value Retail has increased its dividend at approximately 28% 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.
To Sum It Up
Is B&M European Value Retail an attractive dividend stock, or better left on the shelf? B&M European Value Retail 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. It's a promising combination that should mark this company worthy of closer attention.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Be aware that B&M European Value Retail is showing 2 warning signs in our investment analysis, and 1 of those is potentially serious...
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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. 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.
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