Three Days Left Until Zigup Plc (LON:ZIG) Trades Ex-Dividend

Readers hoping to buy Zigup Plc (LON:ZIG) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Thus, you can purchase Zigup's shares before the 29th of August in order to receive the dividend, which the company will pay on the 27th of September.

The company's upcoming dividend is UK£0.175 a share, following on from the last 12 months, when the company distributed a total of UK£0.26 per share to shareholders. Calculating the last year's worth of payments shows that Zigup has a trailing yield of 6.2% on the current share price of UK£4.145. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for Zigup

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Zigup's payout ratio is modest, at just 47% of profit. A useful secondary check can be to evaluate whether Zigup generated enough free cash flow to afford its dividend. It paid out more than half (61%) of its free cash flow in the past year, which is within an average range for most companies.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

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

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. This is why it's a relief to see Zigup earnings per share are up 7.9% per annum over the last five years. Decent historical earnings per share growth suggests Zigup has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Zigup has lifted its dividend by approximately 11% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

The Bottom Line

Has Zigup got what it takes to maintain its dividend payments? Earnings per share growth has been modest, and it's interesting that Zigup is paying out less than half of its earnings and more than half its cash flow to shareholders in the form of dividends. Overall, it's hard to get excited about Zigup from a dividend perspective.

In light of that, while Zigup has an appealing dividend, it's worth knowing the risks involved with this stock. We've identified 3 warning signs with Zigup (at least 2 which are significant), and understanding these should be part of your investment process.

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.