Savills plc (LON:SVS) Stock Goes Ex-Dividend In Just Three Days

Savills plc (LON:SVS) stock is about to trade ex-dividend in 3 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. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. This means that investors who purchase Savills' shares on or after the 31st of August will not receive the dividend, which will be paid on the 2nd of October.

The company's next dividend payment will be UK£0.069 per share. Last year, in total, the company distributed UK£0.36 to shareholders. Based on the last year's worth of payments, Savills has a trailing yield of 4.0% on the current stock price of £8.995. 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! As a result, readers should always check whether Savills has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Savills

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Savills paid out a comfortable 32% of its profit last year. 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. Over the last year, it paid out dividends equivalent to 205% of what it generated in free cash flow, a disturbingly high percentage. It's pretty hard to pay out more than you earn, so we wonder how Savills intends to continue funding this dividend, or if it could be forced to cut the payment.

Savills paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Cash is king, as they say, and were Savills to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

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

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're not enthused to see that Savills's earnings per share have remained effectively flat over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share. Earnings have been growing somewhat, 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, Savills has lifted its dividend by approximately 8.3% a year on average.

Final Takeaway

Is Savills an attractive dividend stock, or better left on the shelf? Earnings per share have been effectively flat over this time, and Savills's paying out less than half its profits and 205% of its cash flow. It's not common to see a company paying out a limited amount of its profits yet a substantially higher percentage of its cash flow, so we'd flag this as a concern. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

However if you're still interested in Savills as a potential investment, you should definitely consider some of the risks involved with Savills. For example, we've found 2 warning signs for Savills that we recommend you consider before investing in the business.

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.

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.