Is It Worth Considering FastPartner AB (publ) (STO:FPAR A) For Its Upcoming Dividend?

FastPartner AB (publ) (STO:FPAR A) stock is about to trade ex-dividend in 3 days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order 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. Therefore, if you purchase FastPartner's shares on or after the 29th of October, you won't be eligible to receive the dividend, when it is paid on the 4th of November.

The company's next dividend payment will be kr00.575 per share, on the back of last year when the company paid a total of kr1.15 to shareholders. Calculating the last year's worth of payments shows that FastPartner has a trailing yield of 3.0% on the current share price of kr038.25. If you buy this business for its dividend, you should have an idea of whether FastPartner's dividend is reliable and sustainable. As a result, readers should always check whether FastPartner has been able to grow its dividends, or if the dividend might be cut.

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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. FastPartner paid out more than half (62%) of its earnings last year, which is a regular payout ratio for most companies. 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. Thankfully its dividend payments took up just 40% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that FastPartner's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Check out our latest analysis for FastPartner

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Readers will understand then, why we're concerned to see FastPartner's earnings per share have dropped 27% a year over the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. FastPartner's dividend payments per share have declined at 0.8% per year on average over the past 10 years, which is uninspiring.

The Bottom Line

Should investors buy FastPartner for the upcoming dividend? The payout ratios are within a reasonable range, implying the dividend may be sustainable. Declining earnings are a serious concern, however, and could pose a threat to the dividend in future. In summary, while it has some positive characteristics, we're not inclined to race out and buy FastPartner today.

So if you want to do more digging on FastPartner, you'll find it worthwhile knowing the risks that this stock faces. Be aware that FastPartner is showing 3 warning signs in our investment analysis, and 1 of those is significant...

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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