There's A Lot To Like About SP Group's (CPH:SPG) Upcoming kr.4.00 Dividend

It looks like SP Group A/S (CPH:SPG) is about to go ex-dividend in the next four days. The ex-dividend date is commonly two business days 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 important as the process of settlement involves at least 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, SP Group investors that purchase the stock on or after the 25th of April will not receive the dividend, which will be paid on the 29th of April.

The company's upcoming dividend is kr.4.00 a share, following on from the last 12 months, when the company distributed a total of kr.4.00 per share to shareholders. Based on the last year's worth of payments, SP Group stock has a trailing yield of around 1.5% on the current share price of kr.265.50. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. SP Group has a low and conservative payout ratio of just 19% of its income after tax. A useful secondary check can be to evaluate whether SP Group generated enough free cash flow to afford its dividend. Luckily it paid out just 11% of its free cash flow last year.

It's positive to see that SP Group'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.

See our latest analysis for SP Group

Click here to see how much of its profit SP Group 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, SP Group's earnings per share have been growing at 12% a year for the past five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. SP Group has delivered 19% dividend growth per year on average over the past 10 years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

The Bottom Line

Has SP Group got what it takes to maintain its dividend payments? It's great that SP Group is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. There's a lot to like about SP Group, and we would prioritise taking a closer look at it.

Curious about whether SP Group has been able to consistently generate growth? Here's a chart of its historical revenue and earnings growth.

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.