Three Days Left Until Peab AB (publ) (STO:PEAB B) Trades Ex-Dividend
Peab AB (publ) (STO:PEAB B) stock is about to trade ex-dividend in 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 of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. This means that investors who purchase Peab'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 kr01.50 per share, on the back of last year when the company paid a total of kr3.30 to shareholders. Based on the last year's worth of payments, Peab has a trailing yield of 3.5% on the current stock price of kr094.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Peab 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. That's why it's good to see Peab paying out a modest 45% of its earnings. 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. Dividends consumed 54% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.
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 Peab
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Peab's earnings per share have fallen at approximately 7.2% a year over the previous five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Peab has delivered 2.4% dividend growth per year on average over the past 10 years.
Final Takeaway
From a dividend perspective, should investors buy or avoid Peab? Its earnings per share have been declining meaningfully, although it is paying out less than half its income and more than half its cash flow as dividends. Neither payout ratio appears an immediate concern, but we're concerned about the earnings. All things considered, we are not particularly enthused about Peab from a dividend perspective.
With that being said, if dividends aren't your biggest concern with Peab, you should know about the other risks facing this business. Every company has risks, and we've spotted 2 warning signs for Peab you should know about.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
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