Here's What We Like About Schwager's (SNSE:SCHWAGER) Upcoming Dividend

Schwager S.A. (SNSE:SCHWAGER) stock is about to trade ex-dividend in 4 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Thus, you can purchase Schwager's shares before the 20th of November in order to receive the dividend, which the company will pay on the 25th of November.

The company's upcoming dividend is CL$0.02 a share, following on from the last 12 months, when the company distributed a total of CL$0.014 per share to shareholders. Calculating the last year's worth of payments shows that Schwager has a trailing yield of 1.3% on the current share price of CL$1.076. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Schwager

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Schwager paid out just 13% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 17% of its cash flow last year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

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

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Schwager has grown its earnings rapidly, up 47% a year for the past five years. Schwager looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.

We'd also point out that Schwager issued a meaningful number of new shares in the past year. It's hard to grow dividends per share when a company keeps creating new shares.

Given that Schwager has only been paying a dividend for a year, there's not much of a past history to draw insight from.

Final Takeaway

Is Schwager an attractive dividend stock, or better left on the shelf? Schwager has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. It's a promising combination that should mark this company worthy of closer attention.

In light of that, while Schwager has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 2 warning signs for Schwager (1 makes us a bit uncomfortable!) that deserve your attention before investing in the shares.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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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.