Be Sure To Check Out Scope Metals Group Ltd. (TLV:SCOP) Before It Goes Ex-Dividend

Readers hoping to buy Scope Metals Group Ltd. (TLV:SCOP) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Accordingly, Scope Metals Group investors that purchase the stock on or after the 25th of November will not receive the dividend, which will be paid on the 2nd of December.

The company's next dividend payment will be ₪2.00 per share, on the back of last year when the company paid a total of ₪5.00 to shareholders. Last year's total dividend payments show that Scope Metals Group has a trailing yield of 3.2% on the current share price of ₪158.50. 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.

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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. Scope Metals Group paid out just 21% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Scope Metals Group paid a dividend despite reporting negative free cash flow last year. That's typically a bad combination and - if this were more than a one-off - not sustainable.

Check out our latest analysis for Scope Metals Group

Click here to see how much of its profit Scope Metals Group paid out over the last 12 months.

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 fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Scope Metals Group, with earnings per share up 9.5% on average over the last five years.

Scope Metals Group also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Scope Metals Group's dividend payments per share have declined at 3.3% per year on average over the past 10 years, which is uninspiring. Scope Metals Group is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

Final Takeaway

From a dividend perspective, should investors buy or avoid Scope Metals Group? Scope Metals Group delivered reasonable earnings per share growth in recent times, and paid out less than half its profits and -87% of its cash flow over the last year, which is a mediocre outcome. 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 Scope Metals Group as a potential investment, you should definitely consider some of the risks involved with Scope Metals Group. To help with this, we've discovered 1 warning sign for Scope Metals Group that you should be aware of before investing in their shares.

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.

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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.