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 Sofia Commerce Pawn Brokerage AD (BUL:SCOM) is about to go ex-dividend in just 2 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a 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. Accordingly, Sofia Commerce Pawn Brokerage AD investors that purchase the stock on or after the 8th of July will not receive the dividend, which will be paid on the 26th of July.
The company's next dividend payment will be лв0.38 per share, on the back of last year when the company paid a total of лв0.50 to shareholders. Based on the last year's worth of payments, Sofia Commerce Pawn Brokerage AD has a trailing yield of 6.1% on the current stock price of BGN8.2. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. 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.
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. It paid out 79% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. We'd be concerned if earnings began to decline.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
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. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, Sofia Commerce Pawn Brokerage AD's earnings per share have been growing at 19% a year for the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Sofia Commerce Pawn Brokerage AD has seen its dividend decline 6.7% per annum on average over the past 10 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.
The Bottom Line
From a dividend perspective, should investors buy or avoid Sofia Commerce Pawn Brokerage AD? Sofia Commerce Pawn Brokerage AD has an acceptable payout ratio and its earnings per share have been improving at a decent rate. Overall, Sofia Commerce Pawn Brokerage AD looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
On that note, you'll want to research what risks Sofia Commerce Pawn Brokerage AD is facing. For example, we've found 3 warning signs for Sofia Commerce Pawn Brokerage AD that we recommend you consider before investing in the business.
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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