Why You Might Be Interested In NP3 Fastigheter AB (publ) (STO:NP3) For Its Upcoming Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that NP3 Fastigheter AB (publ) (STO:NP3) is about to go ex-dividend in just three 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 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. This means that investors who purchase NP3 Fastigheter's shares on or after the 29th of October will not receive the dividend, which will be paid on the 4th of November.

The company's next dividend payment will be kr01.60 per share. Last year, in total, the company distributed kr6.40 to shareholders. Calculating the last year's worth of payments shows that NP3 Fastigheter has a trailing yield of 2.9% on the current share price of kr0224.50. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether NP3 Fastigheter can afford its dividend, and if the dividend could grow.

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Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. NP3 Fastigheter has a low and conservative payout ratio of just 25% of its income after tax. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It distributed 37% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that NP3 Fastigheter'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 NP3 Fastigheter

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

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. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, NP3 Fastigheter's earnings per share have been growing at 18% a year for the past five years. Earnings per share are growing rapidly and the company is keeping more than half of its earnings within the business; an attractive combination which could suggest the company is focused on reinvesting to grow earnings further. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. NP3 Fastigheter has delivered 12% dividend growth per year on average over the past 10 years. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

Final Takeaway

Is NP3 Fastigheter an attractive dividend stock, or better left on the shelf? NP3 Fastigheter has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. NP3 Fastigheter looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

So while NP3 Fastigheter looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Be aware that NP3 Fastigheter is showing 4 warning signs in our investment analysis, and 2 of those are concerning...

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