There's A Lot To Like About Scandic Hotels Group's (STO:SHOT) Upcoming kr01.30 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 Scandic Hotels Group AB (publ) (STO:SHOT) is about to go ex-dividend in just four 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. 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. Accordingly, Scandic Hotels Group investors that purchase the stock on or after the 6th of November will not receive the dividend, which will be paid on the 12th of November.
The company's next dividend payment will be kr01.30 per share, on the back of last year when the company paid a total of kr2.60 to shareholders. Based on the last year's worth of payments, Scandic Hotels Group stock has a trailing yield of around 2.5% on the current share price of kr0103.30. If you buy this business for its dividend, you should have an idea of whether Scandic Hotels Group's dividend is reliable and sustainable. As a result, readers should always check whether Scandic Hotels Group has been able to grow its dividends, or if the dividend might be cut.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Its dividend payout ratio is 77% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. We'd be concerned if earnings began to decline. 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 paid out 11% of its free cash flow as dividends last year, which is conservatively low.
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 Scandic Hotels Group
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see Scandic Hotels Group's earnings have been skyrocketing, up 61% per annum for the past five years. Earnings per share are growing at a rapid rate, yet the company is paying out more than three-quarters of its earnings.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Scandic Hotels Group's dividend payments per share have declined at 1.9% per year on average over the past 10 years, which is uninspiring.
The Bottom Line
From a dividend perspective, should investors buy or avoid Scandic Hotels Group? Scandic Hotels Group's growing earnings per share and conservative payout ratios make for a decent combination. We also like that it paid out a lower percentage of its cash flow. Overall we think this is an attractive combination and worthy of further research.
In light of that, while Scandic Hotels Group has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 1 warning sign for Scandic Hotels Group and you should be aware of it before buying any shares.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
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