Is It Smart To Buy Sláturfélags Suðurlands svf. (ICE:SFS B) Before It Goes Ex-Dividend?

Sláturfélags Suðurlands svf. (ICE:SFS B) stock is about to trade ex-dividend in 2 days. 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. Accordingly, Sláturfélags Suðurlands svf investors that purchase the stock on or after the 18th of March will not receive the dividend, which will be paid on the 26th of March.

The company's next dividend payment will be Kr00.1801 per share, on the back of last year when the company paid a total of Kr0.18 to shareholders. Calculating the last year's worth of payments shows that Sláturfélags Suðurlands svf has a trailing yield of 6.2% on the current share price of Kr02.90. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Sláturfélags Suðurlands svf

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. Sláturfélags Suðurlands svf paid out just 13% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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. The good news is it paid out just 4.2% of its free cash flow in the last year.

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 how much of its profit Sláturfélags Suðurlands svf paid out over the last 12 months.

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. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Sláturfélags Suðurlands svf's earnings have been skyrocketing, up 33% per annum for the past five years. Sláturfélags Suðurlands svf looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Sláturfélags Suðurlands svf has delivered an average of 10% per year annual increase in its dividend, based on the past two years of dividend payments. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

To Sum It Up

Has Sláturfélags Suðurlands svf got what it takes to maintain its dividend payments? We love that Sláturfélags Suðurlands svf is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. There's a lot to like about Sláturfélags Suðurlands svf, and we would prioritise taking a closer look at it.

In light of that, while Sláturfélags Suðurlands svf has an appealing dividend, it's worth knowing the risks involved with this stock. To help with this, we've discovered 4 warning signs for Sláturfélags Suðurlands svf (1 makes us a bit uncomfortable!) that you ought to be aware of before buying the shares.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.