Scandi Standard AB (publ) (STO:SCST) Passed Our Checks, And It's About To Pay A kr01.65 Dividend
Readers hoping to buy Scandi Standard AB (publ) (STO:SCST) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. In other words, investors can purchase Scandi Standard's shares before the 17th of September in order to be eligible for the dividend, which will be paid on the 23rd of September.
The company's next dividend payment will be kr01.65 per share, and in the last 12 months, the company paid a total of kr3.30 per share. Looking at the last 12 months of distributions, Scandi Standard has a trailing yield of approximately 2.2% on its current stock price of kr0149.80. 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 check whether the dividend payments are covered, and if earnings are growing.
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. Scandi Standard paid out a comfortable 50% of its profit last year. A useful secondary check can be to evaluate whether Scandi Standard generated enough free cash flow to afford its dividend. It paid out 97% of its free cash flow in the form of dividends last year, which is outside the comfort zone for most businesses. Companies usually need cash more than they need earnings - expenses don't pay themselves - so it's not great to see it paying out so much of its cash flow.
While Scandi Standard's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Cash is king, as they say, and were Scandi Standard to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.
Check out our latest analysis for Scandi Standard
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. Fortunately for readers, Scandi Standard's earnings per share have been growing at 16% a year for the past five years. Earnings have been growing at a decent rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Scandi Standard has lifted its dividend by approximately 6.2% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
To Sum It Up
Is Scandi Standard an attractive dividend stock, or better left on the shelf? We're glad to see the company has been improving its earnings per share while also paying out a low percentage of income. However, it's not great to see it paying out what we see as an uncomfortably high percentage of its cash flow. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.
So while Scandi Standard looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example - Scandi Standard has 2 warning signs we think you should be aware of.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
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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.