Sonel S.A. (WSE:SON) Passed Our Checks, And It's About To Pay A zł0.70 Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Sonel S.A. (WSE:SON) 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Therefore, if you purchase Sonel's shares on or after the 24th of July, you won't be eligible to receive the dividend, when it is paid on the 20th of August.

The company's upcoming dividend is zł0.70 a share, following on from the last 12 months, when the company distributed a total of zł0.70 per share to shareholders. Looking at the last 12 months of distributions, Sonel has a trailing yield of approximately 3.8% on its current stock price of zł18.55. If you buy this business for its dividend, you should have an idea of whether Sonel's dividend is reliable and sustainable. As a result, readers should always check whether Sonel has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Sonel

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Sonel paid out more than half (55%) of its earnings last year, which is a regular payout ratio for most companies. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Thankfully its dividend payments took up just 49% of the free cash flow it generated, which is a comfortable payout ratio.

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 Sonel paid out over the last 12 months.

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 earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Sonel's earnings per share have been growing at 18% a year for the past five years. Sonel has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. This is a reasonable combination that could hint at some further dividend increases in the future.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Sonel has delivered an average of 8.8% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

Should investors buy Sonel for the upcoming dividend? We like Sonel's growing earnings per share and the fact that - while its payout ratio is around average - it paid out a lower percentage of its cash flow. Sonel looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

So while Sonel looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Every company has risks, and we've spotted 2 warning signs for Sonel you should know about.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com