Yahoo Finance It Might Not Be A Great Idea To Buy Paul Hartmann AG (FRA:PHH2) For Its Next Dividend
Paul Hartmann AG (FRA:PHH2) 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. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, Paul Hartmann investors that purchase the stock on or after the 29th of April will not receive the dividend, which will be paid on the 2nd of May.
The company's next dividend payment will be €8.00 per share, and in the last 12 months, the company paid a total of €8.00 per share. Calculating the last year's worth of payments shows that Paul Hartmann has a trailing yield of 3.8% on the current share price of €210.00. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.
See our latest analysis for Paul Hartmann
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. Paul Hartmann paid out 100% of its earnings, which is more than we're comfortable with, unless there are mitigating circumstances. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. The good news is it paid out just 24% of its free cash flow in the last year.
It's good to see that while Paul Hartmann's dividends were not well covered by profits, at least they are affordable from a cash perspective. Still, if this were to happen repeatedly, we'd be concerned about whether the dividend is sustainable in a downturn.
Click here to see how much of its profit Paul Hartmann paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're discomforted by Paul Hartmann's 18% per annum decline in earnings in the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Paul Hartmann has delivered an average of 3.4% per year annual increase in its dividend, based on the past 10 years of dividend payments. That's intriguing, but the combination of growing dividends despite declining earnings can typically only be achieved by paying out a larger percentage of profits. Paul Hartmann is already paying out a high percentage of its income, so without earnings growth, we're doubtful of whether this dividend will grow much in the future.
The Bottom Line
Has Paul Hartmann got what it takes to maintain its dividend payments? It's not a great combination to see a company with earnings in decline and paying out 100% of its profits, which could imply the dividend may be at risk of being cut in the future. However, the cash payout ratio was much lower - good news from a dividend perspective - which makes us wonder why there is such a mis-match between income and cashflow. It's not an attractive combination from a dividend perspective, and we're inclined to pass on this one for the time being.
So if you're still interested in Paul Hartmann despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. For instance, we've identified 2 warning signs for Paul Hartmann (1 makes us a bit uncomfortable) you should be aware of.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
