Should Income Investors Look At Simonds Farsons Cisk plc (MTSE:SFC) Before Its Ex-Dividend?

Simonds Farsons Cisk plc (MTSE:SFC) is about to trade ex-dividend in the next three days. The ex-dividend date is one business day 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. In other words, investors can purchase Simonds Farsons Cisk's shares before the 4th of June in order to be eligible for the dividend, which will be paid on the 28th of June.

The company's upcoming dividend is €0.11 a share, following on from the last 12 months, when the company distributed a total of €0.16 per share to shareholders. Last year's total dividend payments show that Simonds Farsons Cisk has a trailing yield of 2.4% on the current share price of €6.75. 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! So we need to investigate whether Simonds Farsons Cisk can afford its dividend, and if the dividend could grow.

View our latest analysis for Simonds Farsons Cisk

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Simonds Farsons Cisk is paying out just 1.2% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. 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 74% of its free cash flow as dividends, within the usual range for most companies.

It's positive to see that Simonds Farsons Cisk's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see how much of its profit Simonds Farsons Cisk paid out over the last 12 months.

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's not encouraging to see that Simonds Farsons Cisk's earnings are 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 growth has been slim and the company is paying out more than half of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Simonds Farsons Cisk has increased its dividend at approximately 8.7% a year on average.

To Sum It Up

Is Simonds Farsons Cisk an attractive dividend stock, or better left on the shelf? Simonds Farsons Cisk has struggled to grow earnings per share, and it's paying out less than half of its earnings and more than half its cash flow to shareholders as dividends. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

So while Simonds Farsons Cisk looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. To help with this, we've discovered 1 warning sign for Simonds Farsons Cisk that you should be aware of before investing in their shares.

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.