Is It Worth Considering Nederman Holding AB (publ) (STO:NMAN) For Its Upcoming Dividend?

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Nederman Holding AB (publ) (STO:NMAN) is about to trade ex-dividend in the next couple of days. The ex-dividend date is commonly two business days 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 can take two business days or more to settle. Accordingly, Nederman Holding investors that purchase the stock on or after the 30th of April will not receive the dividend, which will be paid on the 7th of May.

The company's next dividend payment will be kr04.00 per share. Last year, in total, the company distributed kr4.00 to shareholders. Calculating the last year's worth of payments shows that Nederman Holding has a trailing yield of 2.4% on the current share price of kr0169.00. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.

We've discovered 2 warning signs about Nederman Holding. View them for free.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Nederman Holding's payout ratio is modest, at just 45% of profit. 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 58% of its free cash flow as dividends, within the usual range for most companies.

It's positive to see that Nederman Holding'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.

See our latest analysis for Nederman Holding

Click here to see how much of its profit Nederman Holding paid out over the last 12 months.

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 Nederman Holding, with earnings per share up 6.8% on average over the last five years. Decent historical earnings per share growth suggests Nederman Holding has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Nederman Holding has delivered 12% dividend growth per year on average over the past 10 years. 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 Nederman Holding for the upcoming dividend? Earnings per share growth has been modest, and it's interesting that Nederman Holding is paying out less than half of its earnings and more than half its cash flow to shareholders in the form of dividends. To summarise, Nederman Holding looks okay on this analysis, although it doesn't appear a stand-out opportunity.

So while Nederman Holding 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 Nederman Holding 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.