Readers hoping to buy tick Trading Software AG (FRA:TBX) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Typically, the ex-dividend date is one business day 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 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. Therefore, if you purchase tick Trading Software's shares on or after the 27th of April, you won't be eligible to receive the dividend, when it is paid on the 2nd of May.

The company's next dividend payment will be €0.84 per share, and in the last 12 months, the company paid a total of €2.18 per share. Last year's total dividend payments show that tick Trading Software has a trailing yield of 9.0% on the current share price of €9.3. 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.

See our latest analysis for tick Trading Software

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Last year, tick Trading Software paid out 92% of its income as dividends, which is above a level that we're comfortable with, especially if the company needs to reinvest in its business.

Click here to see how much of its profit tick Trading Software paid out over the last 12 months.

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 fall far enough, the company could be forced to cut its dividend. For that reason, it's encouraging to see tick Trading Software's earnings over the past year have risen 30%. While we'd be remiss not to point out that a year is a very short time in dividend investing, it's an encouraging sign so far.

We do note though, one year is too short a time to be drawing strong conclusions about a company's future growth prospects.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. tick Trading Software's dividend payments per share have declined at 8.6% per year on average over the past two years, which is uninspiring. tick Trading Software is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

To Sum It Up

From a dividend perspective, should investors buy or avoid tick Trading Software? Earnings per share have been rising nicely although, even though its cashflow payout ratio is low, we question why tick Trading Software is paying out so much of its profit. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of tick Trading Software's dividend merits.

However if you're still interested in tick Trading Software as a potential investment, you should definitely consider some of the risks involved with tick Trading Software. To that end, you should learn about the 6 warning signs we've spotted with tick Trading Software (including 1 which can't be ignored).

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.

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