Schroders plc (LON:SDR) stock is about to trade ex-dividend in two days. Typically, the ex-dividend date is one business day 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. This means that investors who purchase Schroders' shares on or after the 24th of March will not receive the dividend, which will be paid on the 5th of May.
The company's next dividend payment will be UK£0.85 per share. Last year, in total, the company distributed UK£1.22 to shareholders. Calculating the last year's worth of payments shows that Schroders has a trailing yield of 3.7% on the current share price of £32.69. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
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. Schroders paid out 55% of its earnings to investors last year, a normal payout level for most businesses.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're encouraged by the steady growth at Schroders, with earnings per share up 4.2% on average over the last five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Schroders has delivered an average of 12% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
Is Schroders worth buying for its dividend? Schroders has been generating some growth in earnings per share while paying out more than half of its earnings to shareholders in the form of dividends. We think there are likely better opportunities out there.
Ever wonder what the future holds for Schroders? See what the 15 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
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.