Three Days Left To Buy Cheffelo AB (publ) (STO:CHEF) Before The Ex-Dividend Date

Cheffelo AB (publ) (STO:CHEF) stock is about to trade ex-dividend in three days. 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. Thus, you can purchase Cheffelo's shares before the 25th of April in order to receive the dividend, which the company will pay on the 2nd of May.

The company's next dividend payment will be kr01.78 per share, on the back of last year when the company paid a total of kr1.78 to shareholders. Based on the last year's worth of payments, Cheffelo has a trailing yield of 7.9% on the current stock price of kr022.40. 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! So we need to investigate whether Cheffelo can afford its dividend, and if the dividend could grow.

See our latest analysis for Cheffelo

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Cheffelo paid out 117% of profit in the past year, which we think is typically not sustainable unless there are mitigating characteristics such as unusually strong cash flow or a large cash balance. 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. Luckily it paid out just 5.4% of its free cash flow last year.

It's good to see that while Cheffelo's dividends were not covered by profits, at least they are affordable from a cash perspective. Still, if the company repeatedly paid a dividend greater than its profits, we'd be concerned. Extraordinarily few companies are capable of persistently paying a dividend that is greater than their profits.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Cheffelo's earnings have been skyrocketing, up 89% per annum for the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Cheffelo has delivered 0.9% dividend growth per year on average over the past two years. Earnings per share have been growing much quicker than dividends, potentially because Cheffelo is keeping back more of its profits to grow the business.

To Sum It Up

Is Cheffelo worth buying for its dividend? Earnings per share have been rising nicely although, even though its cashflow payout ratio is low, we question why Cheffelo is paying out so much of its profit. In summary, it's hard to get excited about Cheffelo from a dividend perspective.

In light of that, while Cheffelo has an appealing dividend, it's worth knowing the risks involved with this stock. For example - Cheffelo has 2 warning signs we think you should be aware of.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.