Income Investors Should Know That Solnaberg Property AB (publ) (STO:SOLNA) Goes Ex-Dividend Soon

Readers hoping to buy Solnaberg Property AB (publ) (STO:SOLNA) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Meaning, you will need to purchase Solnaberg Property's shares before the 6th of January to receive the dividend, which will be paid on the 12th of January.

The company's next dividend payment will be kr02.00 per share. Last year, in total, the company distributed kr8.00 to shareholders. Based on the last year's worth of payments, Solnaberg Property has a trailing yield of 6.6% on the current stock price of kr0121.00. 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.

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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. Solnaberg Property paid out more than half (69%) of its earnings last year, which is a regular payout ratio for most companies. A useful secondary check can be to evaluate whether Solnaberg Property generated enough free cash flow to afford its dividend. It paid out 76% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

See our latest analysis for Solnaberg Property

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

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. That's why it's comforting to see Solnaberg Property's earnings have been skyrocketing, up 86% per annum for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Solnaberg Property has seen its dividend decline 2.4% per annum on average over the past nine years, which is not great to see. Solnaberg Property is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

To Sum It Up

Is Solnaberg Property an attractive dividend stock, or better left on the shelf? Higher earnings per share generally lead to higher dividends from dividend-paying stocks over the long run. However, we'd also note that Solnaberg Property is paying out more than half of its earnings and cash flow as profits, which could limit the dividend growth if earnings growth slows. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

In light of that, while Solnaberg Property has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 4 warning signs for Solnaberg Property (1 makes us a bit uncomfortable!) that deserve your attention before investing in the shares.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.