Don't Buy Steadfast Group Limited (ASX:SDF) For Its Next Dividend Without Doing These Checks

By
Simply Wall St
Published
August 27, 2020
ASX:SDF

Steadfast Group Limited (ASX:SDF) is about to trade ex-dividend in the next 4 days. This means that investors who purchase shares on or after the 1st of September will not receive the dividend, which will be paid on the 25th of September.

Steadfast Group's upcoming dividend is AU$0.06 a share, following on from the last 12 months, when the company distributed a total of AU$0.096 per share to shareholders. Last year's total dividend payments show that Steadfast Group has a trailing yield of 2.7% on the current share price of A$3.6. If you buy this business for its dividend, you should have an idea of whether Steadfast Group's dividend is reliable and sustainable. As a result, readers should always check whether Steadfast Group has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Steadfast Group

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Steadfast Group's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
ASX:SDF Historic Dividend August 27th 2020

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. Steadfast Group was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, seven years ago, Steadfast Group has lifted its dividend by approximately 15% a year on average.

Remember, you can always get a snapshot of Steadfast Group's financial health, by checking our visualisation of its financial health, here.

The Bottom Line

Is Steadfast Group worth buying for its dividend? It's definitely not great to see that it paid a dividend despite reporting a loss last year. Worse, the general trend in its earnings looks negative in recent times. All things considered, we're not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.

So if you're still interested in Steadfast Group despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. To that end, you should learn about the 3 warning signs we've spotted with Steadfast Group (including 1 which is a bit unpleasant).

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising 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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