SP Group A/S (CPH:SPG) Stock Goes Ex-Dividend In Just Four Days

SP Group A/S (CPH:SPG) is about to trade ex-dividend in the next four 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. 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. In other words, investors can purchase SP Group's shares before the 28th of April in order to be eligible for the dividend, which will be paid on the 2nd of May.

The company's next dividend payment will be kr.3.00 per share, on the back of last year when the company paid a total of kr.3.00 to shareholders. Based on the last year's worth of payments, SP Group has a trailing yield of 1.0% on the current stock price of DKK290. If you buy this business for its dividend, you should have an idea of whether SP Group's dividend is reliable and sustainable. So we need to investigate whether SP Group can afford its dividend, and if the dividend could grow.

See our latest analysis for SP Group

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. SP Group has a low and conservative payout ratio of just 17% of its income after tax. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out 104% of its free cash flow in the form of dividends last year, which is outside the comfort zone for most businesses. Companies usually need cash more than they need earnings - expenses don't pay themselves - so it's not great to see it paying out so much of its cash flow.

SP Group paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to SP Group's ability to maintain its dividend.

Click here to see how much of its profit SP Group 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. 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 SP Group, with earnings per share up 8.2% on average over the last five years. Earnings have been growing at a steady rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, SP Group has lifted its dividend by approximately 22% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

The Bottom Line

Should investors buy SP Group for the upcoming dividend? SP Group delivered reasonable earnings per share growth in recent times, and paid out less than half its profits and 104% of its cash flow over the last year, which is a mediocre outcome. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.

If you want to look further into SP Group, it's worth knowing the risks this business faces. Every company has risks, and we've spotted 1 warning sign for SP Group you should know about.

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.