Income Investors Should Know That Scandi Standard AB (publ) (STO:SCST) Goes Ex-Dividend Soon

Scandi Standard AB (publ) (STO:SCST) stock is about to trade ex-dividend in 4 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. Accordingly, Scandi Standard investors that purchase the stock on or after the 6th of May will not receive the dividend, which will be paid on the 13th of May.

The company's next dividend payment will be kr01.15 per share, and in the last 12 months, the company paid a total of kr2.30 per share. Looking at the last 12 months of distributions, Scandi Standard has a trailing yield of approximately 3.0% on its current stock price of kr076.70. If you buy this business for its dividend, you should have an idea of whether Scandi Standard's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Scandi Standard

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. Scandi Standard paid out 56% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether Scandi Standard generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 13% of its cash flow last year.

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 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Scandi Standard, with earnings per share up 6.2% on average over the last five years. Decent historical earnings per share growth suggests Scandi Standard 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. In the past nine years, Scandi Standard has increased its dividend at approximately 6.5% 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

Should investors buy Scandi Standard for the upcoming dividend? Earnings per share growth has been modest and Scandi Standard paid out over half of its profits and less than half of its free cash flow, although both payout ratios are within normal limits. To summarise, Scandi Standard looks okay on this analysis, although it doesn't appear a stand-out opportunity.

On that note, you'll want to research what risks Scandi Standard is facing. Every company has risks, and we've spotted 2 warning signs for Scandi Standard 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.