Wallenstam AB (publ) (STO:WALL B) Looks Like A Good Stock, And It's Going Ex-Dividend Soon
It looks like Wallenstam AB (publ) (STO:WALL B) is about to go ex-dividend in the next three days. 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 Wallenstam's shares before the 27th of October to receive the dividend, which will be paid on the 2nd of November.
The company's next dividend payment will be kr00.25 per share, on the back of last year when the company paid a total of kr0.55 to shareholders. Looking at the last 12 months of distributions, Wallenstam has a trailing yield of approximately 1.4% on its current stock price of kr038.02. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether Wallenstam has been able to grow its dividends, or if the dividend might be cut.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Wallenstam has a low and conservative payout ratio of just 12% of its income after tax. 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. Luckily it paid out just 25% of its free cash flow last year.
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 Wallenstam
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Wallenstam earnings per share are up 9.5% per annum over the last five years. Earnings per share have been increasing steadily and management is reinvesting almost all of the profits back into the business. If profits are reinvested effectively, this could be a bullish combination for future earnings and dividends.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Wallenstam has seen its dividend decline 3.1% per annum on average over the past 10 years, which is not great to see. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.
The Bottom Line
Is Wallenstam worth buying for its dividend? Earnings per share have been growing moderately, and Wallenstam is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. It might be nice to see earnings growing faster, but Wallenstam is being conservative with its dividend payouts and could still perform reasonably over the long run. Wallenstam looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
While it's tempting to invest in Wallenstam for the dividends alone, you should always be mindful of the risks involved. To help with this, we've discovered 3 warning signs for Wallenstam (2 are potentially serious!) that you ought to be aware of before buying the shares.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
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