Cellnex Telecom, S.A. (BME:CLNX) Looks Interesting, And It's About To Pay A Dividend
Cellnex Telecom, S.A. (BME:CLNX) stock is about to trade ex-dividend in day or so. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. In other words, investors can purchase Cellnex Telecom's shares before the 13th of July in order to be eligible for the dividend, which will be paid on the 15th of July.
The company's next dividend payment will be €0.37687 per share, on the back of last year when the company paid a total of €0.39 to shareholders. Looking at the last 12 months of distributions, Cellnex Telecom has a trailing yield of approximately 1.5% on its current stock price of €25.18. 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! So we need to investigate whether Cellnex Telecom can afford its dividend, and if the dividend could grow.
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. Cellnex Telecom is paying out just 16% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If Cellnex Telecom didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. It paid out 2.2% of its free cash flow as dividends last year, which is conservatively low.
View our latest analysis for Cellnex Telecom
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Cellnex Telecom reported a loss last year, but at least the general trend suggests its income has been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Cellnex Telecom has lifted its dividend by approximately 17% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
Remember, you can always get a snapshot of Cellnex Telecom's financial health, by checking our visualisation of its financial health, here.
The Bottom Line
Should investors buy Cellnex Telecom for the upcoming dividend? It's hard to get used to Cellnex Telecom paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. It's a promising combination that should mark this company worthy of closer attention.
Wondering what the future holds for Cellnex Telecom? See what the 22 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
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.
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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.