Regular readers will know that we love our dividends at Simply Wall St, which is why it’s exciting to see BASF SE (ETR:BAS) is about to trade ex-dividend in the next 4 days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company’s books to be eligible for a dividend payment. 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 BASF’s shares before the 4th of May in order to be eligible for the dividend, which will be paid on the 6th of May.
The company’s next dividend payment will be €2.25 per share, and in the last 12 months, the company paid a total of €2.25 per share. Based on the last year’s worth of payments, BASF stock has a trailing yield of around 4.1% on the current share price of €54.44. 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.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. BASF paid out 140% of profit in the past year, which we think is typically not sustainable unless there are mitigating characteristics such as unusually strong cash flow or a large cash balance. 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. BASF paid out more free cash flow than it generated – 155%, to be precise – last year, which we think is concerningly high. We’re curious about why the company paid out more cash than it generated last year, since this can be one of the early signs that a dividend may be unsustainable.
Cash is slightly more important than profit from a dividend perspective, but given BASF’s payouts were not well covered by either earnings or cash flow, we would be concerned about the sustainability of this dividend.
See our latest analysis for BASF
Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.
XTRA:BAS Historic Dividend April 29th 2026 Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Readers will understand then, why we’re concerned to see BASF’s earnings per share have dropped 25% a year over the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.
Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. BASF’s dividend payments per share have declined at 2.5% per year on average over the past 10 years, which is uninspiring. While it’s not great that earnings and dividends per share have fallen in recent years, we’re encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.
The Bottom Line
From a dividend perspective, should investors buy or avoid BASF? It’s looking like an unattractive opportunity, with its earnings per share declining, while, paying out an uncomfortably high percentage of both its profits (140%) and cash flow as dividends. This is a clearly suboptimal combination that usually suggests the dividend is at risk of being cut. If not now, then perhaps in the future. It’s not an attractive combination from a dividend perspective, and we’re inclined to pass on this one for the time being.
Although, if you’re still interested in BASF and want to know more, you’ll find it very useful to know what risks this stock faces. Be aware that BASF is showing 2 warning signs in our investment analysis, and 1 of those shouldn’t be ignored…
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.