Three Days Left Until Dometic Group AB (publ) (STO:DOM) Trades Ex-Dividend

Dometic Group AB (publ) (STO:DOM) stock is about to trade ex-dividend in 3 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. Accordingly, Dometic Group investors that purchase the stock on or after the 14th of April will not receive the dividend, which will be paid on the 22nd of April.

The company's upcoming dividend is kr2.45 a share, following on from the last 12 months, when the company distributed a total of kr2.45 per share to shareholders. Calculating the last year's worth of payments shows that Dometic Group has a trailing yield of 3.0% on the current share price of SEK80.88. If you buy this business for its dividend, you should have an idea of whether Dometic Group's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Dometic Group

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. That's why it's good to see Dometic Group paying out a modest 44% of its earnings. A useful secondary check can be to evaluate whether Dometic Group generated enough free cash flow to afford its dividend. The company paid out 92% of its free cash flow over the last year, which we think is outside the ideal range for most businesses. Companies usually need cash more than they need earnings - expenses don't pay themselves - so it's not great to see it paying out so much of its cash flow.

Dometic Group paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to Dometic Group's ability to maintain its dividend.

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. With that in mind, we're encouraged by the steady growth at Dometic Group, with earnings per share up 3.2% on average over the last five years. Earnings have been growing somewhat, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Dometic Group also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. It's hard to grow dividends per share when a company keeps creating new shares.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past five years, Dometic Group has increased its dividend at approximately 5.8% 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.

To Sum It Up

Is Dometic Group an attractive dividend stock, or better left on the shelf? Dometic Group delivered reasonable earnings per share growth in recent times, and paid out less than half its profits and 92% of its cash flow over the last year, which is a mediocre outcome. Overall, it's hard to get excited about Dometic Group from a dividend perspective.

If you're not too concerned about Dometic Group's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. To that end, you should learn about the 4 warning signs we've spotted with Dometic Group (including 1 which shouldn't be ignored).

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.