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Carraro S.p.A.'s (BIT:CARR) Could Be A Buy For Its Upcoming Dividend

Simply Wall St
·3-min read

It looks like Carraro S.p.A. (BIT:CARR) is about to go ex-dividend in the next 4 days. Investors can purchase shares before the 27th of April in order to be eligible for this dividend, which will be paid on the 29th of April.

Carraro's upcoming dividend is €0.10 a share, following on from the last 12 months, when the company distributed a total of €0.10 per share to shareholders. Based on the last year's worth of payments, Carraro has a trailing yield of 6.3% on the current stock price of €1.576. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Carraro

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. Carraro is paying out an acceptable 69% of its profit, a common payout level among most companies.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

BIT:CARR Historical Dividend Yield April 22nd 2020
BIT:CARR Historical Dividend Yield April 22nd 2020

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 Carraro's earnings have been skyrocketing, up 69% per annum for the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Carraro has seen its dividend decline 23% per annum on average over the past two years, which is not great to see. Carraro is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

To Sum It Up

Has Carraro got what it takes to maintain its dividend payments? Earnings per share are growing nicely, and Carraro is paying out a percentage of its earnings that is around the average for dividend-paying stocks. In summary, Carraro appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. To help with this, we've discovered 3 warning signs for Carraro (1 is concerning!) that you ought to be aware of before buying the shares.

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.

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.