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- XTRA:SBS
Stratec SE (ETR:SBS) Passed Our Checks, And It's About To Pay A €0.60 Dividend
Stratec SE (ETR:SBS) stock is about to trade ex-dividend in four days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Thus, you can purchase Stratec's shares before the 30th of June in order to receive the dividend, which the company will pay on the 2nd of July.
The company's upcoming dividend is €0.60 a share, following on from the last 12 months, when the company distributed a total of €0.60 per share to shareholders. Looking at the last 12 months of distributions, Stratec has a trailing yield of approximately 2.3% on its current stock price of €25.80. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Stratec can afford its dividend, and if the dividend could grow.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. That's why it's good to see Stratec paying out a modest 46% of its earnings. A useful secondary check can be to evaluate whether Stratec generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 22% of its cash flow last year.
It's positive to see that Stratec's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
View our latest analysis for Stratec
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Stratec, with earnings per share up 2.1% on average over the last five years. Recent earnings growth has been limited. However, companies that see their growth slow can often choose to pay out a greater percentage of earnings to shareholders, which could see the dividend continue to rise.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Stratec has seen its dividend decline 1.5% per annum on average over the past 10 years, which is not great to see.
To Sum It Up
From a dividend perspective, should investors buy or avoid Stratec? Earnings per share growth has been growing somewhat, and Stratec is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. It might be nice to see earnings growing faster, but Stratec is being conservative with its dividend payouts and could still perform reasonably over the long run. Stratec looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
While it's tempting to invest in Stratec for the dividends alone, you should always be mindful of the risks involved. To help with this, we've discovered 2 warning signs for Stratec (1 is concerning!) that you ought to be aware of before buying the shares.
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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Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
About XTRA:SBS
Stratec
Designs and manufactures automation and instrumentation solutions in the fields of in-vitro diagnostics and life sciences in Germany, the European Union, and internationally.
Flawless balance sheet and undervalued.
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