Yahoo Finance It Might Not Be A Great Idea To Buy Ferrovial, S.A. (BME:FER) For Its Next Dividend
Ferrovial, S.A. (BME:FER) is about to trade ex-dividend in the next 2 days. Investors can purchase shares before the 14th of May in order to be eligible for this dividend, which will be paid on the 22nd of May.
Ferrovial's next dividend payment will be €0.25 per share, on the back of last year when the company paid a total of €0.72 to shareholders. Based on the last year's worth of payments, Ferrovial stock has a trailing yield of around 3.1% on the current share price of €23.5. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Ferrovial can afford its dividend, and if the dividend could grow.
View our latest analysis for Ferrovial
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Ferrovial paid out 98% of its earnings, which is more than we're comfortable with, unless there are mitigating circumstances.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're encouraged by the steady growth at Ferrovial, with earnings per share up 6.0% on average over the last five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Ferrovial has delivered an average of 6.1% per year annual increase in its dividend, based on the past ten years of dividend payments. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
To Sum It Up
From a dividend perspective, should investors buy or avoid Ferrovial? Ferrovial has been growing earnings per share at a reasonable rate, but over the last year its dividend was not well covered by earnings. We think there are likely better opportunities out there.
With that being said, if dividends aren't your biggest concern with Ferrovial, you should know about the other risks facing this business. We've identified 4 warning signs with Ferrovial (at least 2 which are a bit unpleasant), and understanding them should be part of your investment process.
If you're in the market for dividend stocks, we recommend checking our list of top 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.
