Does SCR-Sibelco N.V. (EBR:094426466) Have A Place In Your Dividend Stock Portfolio?

Is SCR-Sibelco N.V. (EBR:094426466) a good dividend stock? How can we tell? Dividend paying companies with growing earnings can be highly rewarding in the long term. On the other hand, investors have been known to buy a stock because of its yield, and then lose money if the company's dividend doesn't live up to expectations.

With a 2.8% yield and a five-year payment history, investors probably think SCR-Sibelco looks like a reliable dividend stock. A 2.8% yield is not inspiring, but the longer payment history has some appeal. Some simple research can reduce the risk of buying SCR-Sibelco for its dividend - read on to learn more.

Explore this interactive chart for our latest analysis on SCR-Sibelco!

Payout ratios

Dividends are usually paid out of company earnings. If a company is paying more than it earns, then the dividend might become unsustainable - hardly an ideal situation. Comparing dividend payments to a company's net profit after tax is a simple way of reality-checking whether a dividend is sustainable. Although SCR-Sibelco pays a dividend, it was loss-making during the past year. When a company is loss-making, we next need to check to see if its cash flows can support the dividend.

Consider getting our latest analysis on SCR-Sibelco's financial position here.

Dividend Volatility

From the perspective of an income investor who wants to earn dividends for many years, there is not much point buying a stock if its dividend is regularly cut or is not reliable. SCR-Sibelco has been paying a dividend for the past five years. During the past five-year period, the first annual payment was €136 in 2016, compared to €163 last year. This works out to be a compound annual growth rate (CAGR) of approximately 3.7% a year over that time.

It's good to see at least some dividend growth. Yet with a relatively short dividend paying history, we wouldn't want to depend on this dividend too heavily.

Dividend Growth Potential

While dividend payments have been relatively reliable, it would also be nice if earnings per share (EPS) were growing, as this is essential to maintaining the dividend's purchasing power over the long term. SCR-Sibelco's earnings per share have fallen -433% over the past year. This is a pretty serious concern, and it would be worth investigating whether something fundamental in the business has changed - or broken. Any one year of performance can be misleading for a variety of reasons, so we wouldn't like to form any strong conclusions based on these numbers alone.

Conclusion

When we look at a dividend stock, we need to form a judgement on whether the dividend will grow, if the company is able to maintain it in a wide range of economic circumstances, and if the dividend payout is sustainable. SCR-Sibelco is paying out a dividend despite reporting a loss; clearly a concern. Earnings per share are down, and to our mind SCR-Sibelco has not been paying a dividend long enough to demonstrate its resilience across economic cycles. In short, we're not keen on SCR-Sibelco from a dividend perspective. Businesses can change, but we've spotted a few too many concerns with this one to get comfortable.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 3 warning signs for SCR-Sibelco (2 are a bit unpleasant!) that you should be aware of before investing.

Looking for more high-yielding dividend ideas? Try our curated list of dividend stocks with a yield above 3%.

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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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