Here's What We Like About Solstad Maritime's (OB:SOMA) Upcoming Dividend

Solstad Maritime ASA (OB:SOMA) is about to trade ex-dividend in the next three days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Accordingly, Solstad Maritime investors that purchase the stock on or after the 10th of November will not receive the dividend, which will be paid on the 13th of November.

The company's next dividend payment will be US$0.032 per share. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

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Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Solstad Maritime paid out a comfortable 27% 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 61% of its free cash flow as dividends, within the usual 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.

View our latest analysis for Solstad Maritime

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

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 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 we're optimistic about Solstad Maritime's earnings, which have ripped higher, up 29% over the past year. While we'd be remiss not to point out that a year is a very short time in dividend investing, it's an encouraging sign so far.

One year is a very short time frame in the pantheon of investing, so we wouldn't get too hung up on these numbers.

This is Solstad Maritime's first year of paying a regular dividend, which is exciting for shareholders - but it does mean there's no dividend history to examine.

To Sum It Up

Should investors buy Solstad Maritime for the upcoming dividend? Earnings per share have grown at a nice rate in recent times and over the last year, Solstad Maritime paid out less than half its earnings and a bit over half its free cash flow. Solstad Maritime looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. To help with this, we've discovered 2 warning signs for Solstad Maritime that you should be aware of before investing in their shares.

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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.