Creades (STO:CRED A) Could Be A Buy For Its Upcoming Dividend

It looks like Creades AB (STO:CRED A) is about to go ex-dividend in the next 3 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. Meaning, you will need to purchase Creades' shares before the 28th of October to receive the dividend, which will be paid on the 1st of November.

The company's upcoming dividend is kr00.40 a share, following on from the last 12 months, when the company distributed a total of kr1.60 per share to shareholders. Last year's total dividend payments show that Creades has a trailing yield of 2.2% on the current share price of kr073.10. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Creades

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. Creades paid out just 10% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

Click here to see how much of its profit Creades 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 Creades's earnings have been skyrocketing, up 30% per annum for the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, eight years ago, Creades has lifted its dividend by approximately 1.7% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Creades is keeping back more of its profits to grow the business.

The Bottom Line

Is Creades worth buying for its dividend? Companies like Creades that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. In summary, Creades appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

While it's tempting to invest in Creades for the dividends alone, you should always be mindful of the risks involved. To help with this, we've discovered 4 warning signs for Creades (2 make us uncomfortable!) that you ought to be aware of before buying the shares.

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.