Why You Might Be Interested In SergeFerrari Group SA (EPA:SEFER) For Its Upcoming Dividend

SergeFerrari Group SA (EPA:SEFER) is about to trade ex-dividend in the next four days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase SergeFerrari Group's shares before the 28th of June in order to receive the dividend, which the company will pay on the 2nd of July.

The company's next dividend payment will be €0.12 per share, on the back of last year when the company paid a total of €0.12 to shareholders. Based on the last year's worth of payments, SergeFerrari Group has a trailing yield of 2.0% on the current stock price of €6.04. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether SergeFerrari Group has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for SergeFerrari 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. That's why it's good to see SergeFerrari Group paying out a modest 30% of its earnings. 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. It distributed 35% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that SergeFerrari 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.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see SergeFerrari Group has grown its earnings rapidly, up 21% a year for the past five years. SergeFerrari Group is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. SergeFerrari Group's dividend payments are effectively flat on where they were nine years ago.

Final Takeaway

Should investors buy SergeFerrari Group for the upcoming dividend? It's great that SergeFerrari 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. SergeFerrari Group looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

In light of that, while SergeFerrari Group has an appealing dividend, it's worth knowing the risks involved with this stock. Be aware that SergeFerrari Group is showing 5 warning signs in our investment analysis, and 1 of those is significant...

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.

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