Only Four Days Left To Cash In On Spheria Emerging Companies' (ASX:SEC) Dividend

Spheria Emerging Companies Limited (ASX:SEC) is about to trade ex-dividend in the next 4 days. Ex-dividend means that investors that purchase the stock on or after the 9th of March will not receive this dividend, which will be paid on the 24th of March.

Spheria Emerging Companies's next dividend payment will be AU$0.035 per share. Last year, in total, the company distributed AU$0.055 to shareholders. Based on the last year's worth of payments, Spheria Emerging Companies has a trailing yield of 2.6% on the current stock price of A$2.08. If you buy this business for its dividend, you should have an idea of whether Spheria Emerging Companies's dividend is reliable and sustainable. As a result, readers should always check whether Spheria Emerging Companies has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Spheria Emerging Companies

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. That's why it's good to see Spheria Emerging Companies paying out a modest 37% of its earnings.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

Click here to see how much of its profit Spheria Emerging Companies paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. From this perspective it's somewhat discouraging that earnings per share are down 2.9% but we'd note that investment in future growth can cause a similar impact.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last three years, Spheria Emerging Companies has lifted its dividend by approximately 11% a year on average.

The Bottom Line

From a dividend perspective, should investors buy or avoid Spheria Emerging Companies? Spheria Emerging Companies's earnings per share are down sharply over the last year, although we note that it is paying out a low fraction of its earnings. From a dividend perspective we struggle to see value in a company with declining earnings per share, but it's also true that a one-year decline often doesn't mean much. So we wouldn't be too quick to write this one off. At best we would put it on a watch-list to see if business conditions improve, as it doesn't look like a clear opportunity right now.

However if you're still interested in Spheria Emerging Companies as a potential investment, you should definitely consider some of the risks involved with Spheria Emerging Companies. For example, Spheria Emerging Companies has 4 warning signs (and 2 which are potentially serious) we think you should know about.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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