Be Sure To Check Out Awardit AB (publ) (STO:AWRD) Before It Goes Ex-Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Awardit AB (publ) (STO:AWRD) is about to trade ex-dividend in the next three days. If you purchase the stock on or after the 23rd of March, you won't be eligible to receive this dividend, when it is paid on the 29th of March.

Awardit's upcoming dividend is kr0.56 a share, following on from the last 12 months, when the company distributed a total of kr2.24 per share to shareholders. Calculating the last year's worth of payments shows that Awardit has a trailing yield of 2.2% on the current share price of SEK103.5. If you buy this business for its dividend, you should have an idea of whether Awardit's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Awardit

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. Awardit is paying out just 17% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. 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 distributed 33% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that Awardit's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

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

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 Awardit, with earnings per share up 8.2% on average over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. Organisations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Awardit has delivered 3.8% dividend growth per year on average over the past three years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

From a dividend perspective, should investors buy or avoid Awardit? Earnings per share growth has been growing somewhat, and Awardit is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. It might be nice to see earnings growing faster, but Awardit is being conservative with its dividend payouts and could still perform reasonably over the long run. There's a lot to like about Awardit, and we would prioritise taking a closer look at it.

In light of that, while Awardit has an appealing dividend, it's worth knowing the risks involved with this stock. Every company has risks, and we've spotted 4 warning signs for Awardit (of which 1 is concerning!) you should know about.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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