BE Semiconductor Industries N.V. (AMS:BESI) stock is about to trade ex-dividend in 4 days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Thus, you can purchase BE Semiconductor Industries' shares before the 25th of April in order to receive the dividend, which the company will pay on the 2nd of May.

The company's next dividend payment will be €2.18 per share, on the back of last year when the company paid a total of €2.18 to shareholders. Calculating the last year's worth of payments shows that BE Semiconductor Industries has a trailing yield of 2.3% on the current share price of €93.98. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

Our free stock report includes 1 warning sign investors should be aware of before investing in BE Semiconductor Industries. Read for free now.

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. BE Semiconductor Industries paid out 94% 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 company paid out 101% 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.

Cash is slightly more important than profit from a dividend perspective, but given BE Semiconductor Industries's payments were not well covered by either earnings or cash flow, we are concerned about the sustainability of this dividend.

Check out our latest analysis for BE Semiconductor Industries

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.ENXTAM:BESI Historic Dividend April 20th 2025

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. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, BE Semiconductor Industries's earnings per share have been growing at 15% a year for the past five years. We're a bit put out by the fact that BE Semiconductor Industries paid out virtually all of its earnings and cashflow as dividends over the last year. Earnings are growing at a decent clip, so this payout ratio may prove sustainable, but it's not great to see.

Story Continues

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, BE Semiconductor Industries has increased its dividend at approximately 29% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

To Sum It Up

From a dividend perspective, should investors buy or avoid BE Semiconductor Industries? While it's nice to see earnings per share growing, we're curious about how BE Semiconductor Industries intends to continue growing, or maintain the dividend in a downturn given that it's paying out such a high percentage of its earnings and cashflow. Overall it doesn't look like the most suitable dividend stock for a long-term buy and hold investor.

Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with BE Semiconductor Industries. In terms of investment risks, we've identified 1 warning sign with BE Semiconductor Industries and understanding them should be part of your investment process.

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.

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