ITAB Shop Concept AB (publ) (STO:ITAB) Passed Our Checks, And It's About To Pay A kr00.75 Dividend

Readers hoping to buy ITAB Shop Concept AB (publ) (STO:ITAB) 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 because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase ITAB Shop Concept's shares on or after the 16th of May, you won't be eligible to receive the dividend, when it is paid on the 22nd of May.

The company's next dividend payment will be kr00.75 per share, on the back of last year when the company paid a total of kr0.75 to shareholders. Looking at the last 12 months of distributions, ITAB Shop Concept has a trailing yield of approximately 3.7% on its current stock price of kr020.40. If you buy this business for its dividend, you should have an idea of whether ITAB Shop Concept's dividend is reliable and sustainable. So we need to investigate whether ITAB Shop Concept can afford its dividend, and if the dividend could grow.

View our latest analysis for ITAB Shop Concept

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. ITAB Shop Concept paid out 58% of its earnings to investors last year, a normal payout level for most businesses. 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. It paid out 16% of its free cash flow as dividends last year, which is conservatively low.

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 ITAB Shop Concept 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 fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see ITAB Shop Concept earnings per share are up 8.3% per annum over the last five years. Decent historical earnings per share growth suggests ITAB Shop Concept has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.

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, ITAB Shop Concept has lifted its dividend by approximately 4.1% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

Final Takeaway

Is ITAB Shop Concept an attractive dividend stock, or better left on the shelf? While earnings per share growth has been modest, ITAB Shop Concept's dividend payouts are around an average level; without a sharp change in earnings we feel that the dividend is likely somewhat sustainable. Pleasingly the company paid out a conservatively low percentage of its free cash flow. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

On that note, you'll want to research what risks ITAB Shop Concept is facing. For example - ITAB Shop Concept has 1 warning sign we think you should be aware of.

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.