Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that HMS Bergbau AG (ETR:HMU) is about to go ex-dividend in just 3 days. 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 because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase HMS Bergbau's shares on or after the 30th of August, you won't be eligible to receive the dividend, when it is paid on the 1st of September.

The upcoming dividend for HMS Bergbau is €0.77 per share, increased from last year's total dividends per share of €0.04. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for HMS Bergbau

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. HMS Bergbau paid out a comfortable 34% of its profit last year. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend.

Click here to see how much of its profit HMS Bergbau paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. 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 HMS Bergbau's earnings have been skyrocketing, up 68% per annum for the past five years.

Given that HMS Bergbau has only been paying a dividend for a year, there's not much of a past history to draw insight from.

To Sum It Up

Should investors buy HMS Bergbau for the upcoming dividend? We're glad to see the company has been improving its earnings per share while also paying out a low percentage of income. However, it's not great to see it paying out what we see as an uncomfortably high percentage of its cash flow. In summary, it's hard to get excited about HMS Bergbau from a dividend perspective.

On that note, you'll want to research what risks HMS Bergbau is facing. For instance, we've identified 2 warning signs for HMS Bergbau (1 is significant) you should be aware of.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.