Yahoo Finance Three Days Left Until LANXESS Aktiengesellschaft (ETR:LXS) Trades Ex-Dividend
Readers hoping to buy LANXESS Aktiengesellschaft (ETR:LXS) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. 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. In other words, investors can purchase LANXESS' shares before the 25th of May in order to be eligible for the dividend, which will be paid on the 30th of May.
The company's upcoming dividend is €1.05 a share, following on from the last 12 months, when the company distributed a total of €1.05 per share to shareholders. Based on the last year's worth of payments, LANXESS has a trailing yield of 3.0% on the current stock price of €35.29. If you buy this business for its dividend, you should have an idea of whether LANXESS's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
View our latest analysis for LANXESS
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. LANXESS paid out more than half (71%) of its earnings last year, which is a regular payout ratio for most companies. A useful secondary check can be to evaluate whether LANXESS generated enough free cash flow to afford its dividend. The company paid out 97% of its free cash flow over the last year, which we think is outside the ideal range for most businesses. Companies usually need cash more than they need earnings - expenses don't pay themselves - so it's not great to see it paying out so much of its cash flow.
While LANXESS's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Cash is king, as they say, and were LANXESS to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.
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. That's why it's comforting to see LANXESS's earnings have been skyrocketing, up 43% per annum for the past five years. Earnings have been growing quickly, but we're concerned dividend payments consumed most of the company's cash flow over the past year.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. LANXESS has delivered an average of 2.1% per year annual increase in its dividend, based on the past 10 years of dividend payments. Earnings per share have been growing much quicker than dividends, potentially because LANXESS is keeping back more of its profits to grow the business.
The Bottom Line
Should investors buy LANXESS for the upcoming dividend? Earnings per share growth is a positive, and the company's payout ratio looks normal. However, we note LANXESS paid out a much higher percentage of its free cash flow, which makes us uncomfortable. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of LANXESS's dividend merits.
If you want to look further into LANXESS, it's worth knowing the risks this business faces. For instance, we've identified 3 warning signs for LANXESS (1 is significant) 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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