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Hexaom S.A. (EPA:HEXA) is about to trade ex-dividend in the next 3 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company’s books in order 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. This means that investors who purchase Hexaom’s shares on or after the 14th of June will not receive the dividend, which will be paid on the 16th of June.
The company’s next dividend payment will be €1.41 per share. Last year, in total, the company distributed €1.41 to shareholders. Based on the last year’s worth of payments, Hexaom stock has a trailing yield of around 5.0% on the current share price of €28.4. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That’s why we should always check whether the dividend payments appear sustainable, and if the company is growing.
View our latest analysis for Hexaom
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. Fortunately Hexaom’s payout ratio is modest, at just 45% of profit. A useful secondary check can be to evaluate whether Hexaom generated enough free cash flow to afford its dividend. Fortunately, it paid out only 32% of its free cash flow in the past year.
It’s positive to see that Hexaom’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 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. This is why it’s a relief to see Hexaom earnings per share are up 7.3% per annum over the last five years. Management have been reinvested more than half of the company’s earnings within the business, and the company has been able to grow earnings with this retained capital. We think this is generally an attractive combination, as dividends can grow through a combination of earnings growth and or a higher payout ratio over time.
Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. Hexaom has delivered 0.8% dividend growth per year on average over the past 10 years.
Final Takeaway
Is Hexaom an attractive dividend stock, or better left on the shelf? Earnings per share growth has been growing somewhat, and Hexaom is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Hexaom is halfway there. Hexaom looks solid on this analysis overall, and we’d definitely consider investigating it more closely.
So while Hexaom looks good from a dividend perspective, it’s always worthwhile being up to date with the risks involved in this stock. For example – Hexaom has 2 warning signs we think you should be aware of.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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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