Only Three Days Left To Cash In On Solnaberg Property's (STO:SOLNA) Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Solnaberg Property AB (publ) (STO:SOLNA) is about to trade ex-dividend in the next three days. The ex-dividend date is usually set to be two business days 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Thus, you can purchase Solnaberg Property's shares before the 7th of July in order to receive the dividend, which the company will pay on the 11th of July.

The company's next dividend payment will be kr02.00 per share. Last year, in total, the company distributed kr8.00 to shareholders. Looking at the last 12 months of distributions, Solnaberg Property has a trailing yield of approximately 6.5% on its current stock price of kr0123.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

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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. Last year Solnaberg Property paid out 96% of its profits as dividends to shareholders, suggesting the dividend is not well covered by earnings. 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 paid out more than half (71%) of its free cash flow in the past year, which is within an average range for most companies.

It's good to see that while Solnaberg Property's dividends were not well covered by profits, at least they are affordable from a cash perspective. Still, if the company continues paying out such a high percentage of its profits, the dividend could be at risk if business turns sour.

See our latest analysis for Solnaberg Property

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

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Solnaberg Property has grown its earnings rapidly, up 74% a year for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Solnaberg Property has seen its dividend decline 2.8% per annum on average over the past eight years, which is not great to see. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.

Final Takeaway

Has Solnaberg Property got what it takes to maintain its dividend payments? Growing earnings per share and a normal cashflow payout ratio is an ok combination, but we're concerned that the company is paying out such a high percentage of its income as dividends. To summarise, Solnaberg Property looks okay on this analysis, although it doesn't appear a stand-out opportunity.

So if you want to do more digging on Solnaberg Property, you'll find it worthwhile knowing the risks that this stock faces. For instance, we've identified 4 warning signs for Solnaberg Property (2 make us uncomfortable) 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.