Regular readers will know we love our dividends at Simply Wall St, which is why it’s exciting to see Elanders AB (publisher) (STO:ELAN B) is set to trade ex-dividend in the next 3 days. The ex-dividend date is one business day before a company’s record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important because any trade in a share must have settled before the record date to be eligible for a dividend. In other words, investors can buy Elanders shares before April 22 in order to be eligible for the dividend, which will be paid on April 28.
The company’s next dividend payment will be 3.60 kr per share, after last year when the company paid a total of 3.60 kr to shareholders. Based on the value of last year’s payouts, Elanders stock has a yield of around 2.7% on the current share price of SEK 131.8. If you’re buying this company for its dividend, you should have some idea of the reliability and sustainability of Elanders’ dividend. We therefore need to check whether dividend payments are covered and whether profits are increasing.
See our latest analysis for Elanders
If a company pays out more dividends than it has earned, the dividend may become unsustainable – a less than ideal situation. Elanders paid out a comfortable 39% of its profits last year. That said, even very profitable companies can sometimes not generate enough cash to pay the dividend, so we should always check if the dividend is covered by cash flow. The good thing is that dividends have been well covered by free cash flow, with the company paying out 12% of its free cash flow last year.
It is encouraging to see that the dividend is covered by both earnings and cash flow. This generally suggests that the dividend is sustainable, as long as earnings don’t drop precipitously.
Click here to see the company’s payout ratio, as well as analysts’ estimates of its future dividends.
Have earnings and dividends increased?
Companies with consistently rising earnings per share tend to create the best dividend-paying stocks because they generally find it easier to increase dividends per share. If business goes into a recession and the dividend is cut, the company could see its value drop precipitously. That’s why it’s a relief to see Elanders’ earnings per share growing 4.4% a year over the past five years. Earnings per share growth of late has not been exceptional. However, companies that are seeing slow growth can often choose to pay out a higher percentage of their profits to shareholders, which could see the dividend continue to rise.
Most investors primarily gauge a company’s dividend prospects by checking the historical rate of dividend growth. Elanders has recorded dividend growth of 22% per year on average over the past 10 years. We are pleased to see dividends rising alongside earnings over several years, which may be a sign that the company intends to share the growth with shareholders.
Is Elanders worth buying for its dividend? Earnings per share growth has picked up somewhat, and Elanders is paying out less than half of its earnings and cash flow as dividends. This is interesting for several reasons, as it suggests that management may be reinvesting heavily in the business, but it also offers the possibility of increasing the dividend over time. We’d rather see earnings grow faster, but the best long-term dividend-paying stocks typically combine significant earnings-per-share growth with a low payout ratio, and Elanders is halfway there. It’s a promising combination that should mark this company worthy of attention.
In light of this, although Elanders has an attractive dividend, it is worth knowing the risks associated with this stock. For example, we found 3 warning signs for Elanders which we recommend you consider before investing in the company.
As a general rule, we don’t recommend simply buying the first dividend-paying stock you see. Here is a curated list of attractive stocks that are strong dividend payers.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.