Vesuvius plc (LON:VSVS) stock is about to trade ex-dividend in four days. 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 as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, Vesuvius investors that purchase the stock on or after the 24th of April will not receive the dividend, which will be paid on the 6th of June.

The company's next dividend payment will be UK£0.164 per share. Last year, in total, the company distributed UK£0.23 to shareholders. Calculating the last year's worth of payments shows that Vesuvius has a trailing yield of 7.0% on the current share price of UK£3.364. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. 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 Vesuvius. Read for free now.

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Vesuvius is paying out an acceptable 70% of its profit, a common payout level among most companies. 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. It paid out 106% of its free cash flow in the form of dividends last year, which is outside the comfort zone for most businesses. Cash flows are usually much more volatile than earnings, so this could be a temporary effect - but we'd generally want to look more closely here.

Vesuvius paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to Vesuvius's ability to maintain its dividend.

Check out our latest analysis for Vesuvius

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.LSE:VSVS Historic Dividend April 19th 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Vesuvius earnings per share are up 3.6% per annum over the last five years. Earnings have been growing somewhat, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

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Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Vesuvius has delivered 4.4% dividend growth per year on average over the past 10 years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

Is Vesuvius worth buying for its dividend? Vesuvius is paying out a reasonable percentage of its income and an uncomfortably high 106% of its cash flow as dividends. At least earnings per share have been growing steadily. It's not an attractive combination from a dividend perspective, and we're inclined to pass on this one for the time being.

With that in mind though, if the poor dividend characteristics of Vesuvius don't faze you, it's worth being mindful of the risks involved with this business. For example - Vesuvius has 1 warning sign we think 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.

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