Should Income Investors Look At ScandBook Holding AB (publ) (STO:SBOK) Before Its Ex-Dividend?

Readers hoping to buy ScandBook Holding AB (publ) (STO:SBOK) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date generally occurs two days 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Accordingly, ScandBook Holding investors that purchase the stock on or after the 27th of May will not receive the dividend, which will be paid on the 3rd of June.

The company's upcoming dividend is kr02.75 a share, following on from the last 12 months, when the company distributed a total of kr2.25 per share to shareholders. Based on the last year's worth of payments, ScandBook Holding stock has a trailing yield of around 5.3% on the current share price of kr042.20. If you buy this business for its dividend, you should have an idea of whether ScandBook Holding's dividend is reliable and sustainable. So we need to investigate whether ScandBook Holding can afford its dividend, and if the dividend could grow.

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Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. ScandBook Holding paid out 56% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Over the last year it paid out 62% of its free cash flow as dividends, within the usual range for most companies.

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.

View our latest analysis for ScandBook Holding

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

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see ScandBook Holding's earnings have been skyrocketing, up 33% per annum for the past five years. Management appears to be striking a nice balance between reinvesting for growth and paying dividends to shareholders. With a reasonable payout ratio, profits being reinvested, and some earnings growth, ScandBook Holding could have strong prospects for future increases to the dividend.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. ScandBook Holding has delivered 30% dividend growth per year on average over the past four years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

The Bottom Line

Is ScandBook Holding an attractive dividend stock, or better left on the shelf? It's good to see earnings are growing, since all of the best dividend stocks grow their earnings meaningfully over the long run. However, we'd also note that ScandBook Holding is paying out more than half of its earnings and cash flow as profits, which could limit the dividend growth if earnings growth slows. Overall, it's hard to get excited about ScandBook Holding from a dividend perspective.

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

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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.