Should You Buy Semapa - Sociedade de Investimento e Gestão, SGPS, S.A. (ELI:SEM) For Its Upcoming Dividend?

Readers hoping to buy Semapa - Sociedade de Investimento e Gestão, SGPS, S.A. (ELI:SEM) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date occurs one day 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. 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, Semapa - Sociedade de Investimento e Gestão SGPS investors that purchase the stock on or after the 10th of June will not receive the dividend, which will be paid on the 12th of June.

The company's next dividend payment will be €0.626 per share, and in the last 12 months, the company paid a total of €0.63 per share. Looking at the last 12 months of distributions, Semapa - Sociedade de Investimento e Gestão SGPS has a trailing yield of approximately 4.1% on its current stock price of €15.30. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Semapa - Sociedade de Investimento e Gestão SGPS

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. Semapa - Sociedade de Investimento e Gestão SGPS has a low and conservative payout ratio of just 18% of its income after tax. 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. Thankfully its dividend payments took up just 49% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that Semapa - Sociedade de Investimento e Gestão SGPS'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 the company's payout ratio, plus analyst estimates of its future dividends.

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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, Semapa - Sociedade de Investimento e Gestão SGPS's earnings per share have been growing at 16% a year for the past five years. Earnings per share are growing rapidly and the company is keeping more than half of its earnings within the business; an attractive combination which could suggest the company is focused on reinvesting to grow earnings further. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Semapa - Sociedade de Investimento e Gestão SGPS has lifted its dividend by approximately 6.5% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

Is Semapa - Sociedade de Investimento e Gestão SGPS an attractive dividend stock, or better left on the shelf? It's great that Semapa - Sociedade de Investimento e Gestão SGPS is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. Semapa - Sociedade de Investimento e Gestão SGPS looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

On that note, you'll want to research what risks Semapa - Sociedade de Investimento e Gestão SGPS is facing. For instance, we've identified 3 warning signs for Semapa - Sociedade de Investimento e Gestão SGPS (1 shouldn't be ignored) you should be aware of.

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.