Sphera Franchise Group S.A. (BVB:SFG) Pays A RON1.16 Dividend In Just Three Days

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Sphera Franchise Group S.A. (BVB:SFG) is about to trade ex-dividend in the next three days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase Sphera Franchise Group's shares before the 18th of September in order to receive the dividend, which the company will pay on the 10th of October.

The company's next dividend payment will be RON1.16 per share. Last year, in total, the company distributed RON1.68 to shareholders. Last year's total dividend payments show that Sphera Franchise Group has a trailing yield of 7.9% on the current share price of RON21.3. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Sphera Franchise Group can afford its dividend, and if the dividend could grow.

View our latest analysis for Sphera Franchise Group

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. Sphera Franchise Group distributed an unsustainably high 116% of its profit as dividends to shareholders last year. Without more sustainable payment behaviour, the dividend looks precarious. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Fortunately, it paid out only 29% of its free cash flow in the past year.

It's good to see that while Sphera Franchise Group's dividends were not covered by profits, at least they are affordable from a cash perspective. Still, if the company repeatedly paid a dividend greater than its profits, we'd be concerned. Very few companies are able to sustainably pay dividends larger than their reported earnings.

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, Sphera Franchise Group's earnings per share have been growing at 14% a year for the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past four years, Sphera Franchise Group has increased its dividend at approximately 48% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

Final Takeaway

Has Sphera Franchise Group got what it takes to maintain its dividend payments? Earnings per share have been rising nicely although, even though its cashflow payout ratio is low, we question why Sphera Franchise Group is paying out so much of its profit. In summary, it's hard to get excited about Sphera Franchise Group from a dividend perspective.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Our analysis shows 2 warning signs for Sphera Franchise Group and you should be aware of these before buying any 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.