Sofia Commerce-Pawn Brokerage AD (BUL:SCOM) Could Be A Buy For Its Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Sofia Commerce-Pawn Brokerage AD (BUL:SCOM) is about to trade ex-dividend in the next four days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Thus, you can purchase Sofia Commerce-Pawn Brokerage AD's shares before the 4th of July in order to receive the dividend, which the company will pay on the 19th of August.

The company's next dividend payment will be лв0.08 per share, and in the last 12 months, the company paid a total of лв0.10 per share. Calculating the last year's worth of payments shows that Sofia Commerce-Pawn Brokerage AD has a trailing yield of 2.5% on the current share price of лв3.98. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Sofia Commerce-Pawn Brokerage AD has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Sofia Commerce-Pawn Brokerage AD

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. Sofia Commerce-Pawn Brokerage AD has a low and conservative payout ratio of just 19% of its income after tax.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

Click here to see how much of its profit Sofia Commerce-Pawn Brokerage AD paid out over the last 12 months.

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. It's encouraging to see Sofia Commerce-Pawn Brokerage AD has grown its earnings rapidly, up 39% a year for the past five years.

Sofia Commerce-Pawn Brokerage AD also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Sofia Commerce-Pawn Brokerage AD has seen its dividend decline 11% per annum on average over the past eight years, which is not great to see. Sofia Commerce-Pawn Brokerage AD is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

Final Takeaway

Is Sofia Commerce-Pawn Brokerage AD an attractive dividend stock, or better left on the shelf? Companies like Sofia Commerce-Pawn Brokerage AD that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. We think this is a pretty attractive combination, and would be interested in investigating Sofia Commerce-Pawn Brokerage AD more closely.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. In terms of investment risks, we've identified 2 warning signs with Sofia Commerce-Pawn Brokerage AD and understanding them should be part of your investment process.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com