Fresenius Medical Care AG & Co. KGaA (ETR:FME) Is About To Go Ex-Dividend, And It Pays A 2.6% Yield
Fresenius Medical Care AG & Co. KGaA (ETR:FME) stock is about to trade ex-dividend in three days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. In other words, investors can purchase Fresenius Medical Care KGaA's shares before the 17th of May in order to be eligible for the dividend, which will be paid on the 19th of May.
The company's upcoming dividend is €1.12 a share, following on from the last 12 months, when the company distributed a total of €1.12 per share to shareholders. Based on the last year's worth of payments, Fresenius Medical Care KGaA stock has a trailing yield of around 2.6% on the current share price of €43.76. If you buy this business for its dividend, you should have an idea of whether Fresenius Medical Care KGaA's dividend is reliable and sustainable. As a result, readers should always check whether Fresenius Medical Care KGaA has been able to grow its dividends, or if the dividend might be cut.
Check out our latest analysis for Fresenius Medical Care KGaA
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. Fresenius Medical Care KGaA is paying out an acceptable 55% of its profit, a common payout level among most companies. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It distributed 28% of its free cash flow as dividends, a comfortable payout level for most companies.
It's positive to see that Fresenius Medical Care KGaA's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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. Readers will understand then, why we're concerned to see Fresenius Medical Care KGaA's earnings per share have dropped 13% a year over the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, Fresenius Medical Care KGaA has lifted its dividend by approximately 4.1% a year on average. Growing the dividend payout ratio while earnings are declining can deliver nice returns for a while, but it's always worth checking for when the company can't increase the payout ratio any more - because then the music stops.
The Bottom Line
From a dividend perspective, should investors buy or avoid Fresenius Medical Care KGaA? The payout ratios are within a reasonable range, implying the dividend may be sustainable. Declining earnings are a serious concern, however, and could pose a threat to the dividend in future. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.
With that being said, if dividends aren't your biggest concern with Fresenius Medical Care KGaA, you should know about the other risks facing this business. We've identified 2 warning signs with Fresenius Medical Care KGaA (at least 1 which is significant), and understanding them should be part of your investment process.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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