Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
It looks like Saltängen Property Invest AB (publ) (STO:SAPIAB) is about to go ex-dividend in the next 3 days. You will need to purchase shares before the 16th of July to receive the dividend, which will be paid on the 22nd of July.
Saltängen Property Invest’s next dividend payment will be kr2.45 per share, and in the last 12 months, the company paid a total of kr9.80 per share. Looking at the last 12 months of distributions, Saltängen Property Invest has a trailing yield of approximately 7.7% on its current stock price of SEK128. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Saltängen Property Invest can afford its dividend, and if the dividend could grow.
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. Saltängen Property Invest paid out a comfortable 44% of its profit last year. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Over the last year, it paid out dividends equivalent to 310% of what it generated in free cash flow, a disturbingly high percentage. Unless there were something in the business we’re not grasping, this could signal a risk that the dividend may have to be cut in the future.
While Saltängen Property Invest’s dividends were covered by the company’s reported profits, cash is somewhat more important, so it’s not great to see that the company didn’t generate enough cash to pay its dividend. Cash is king, as they say, and were Saltängen Property Invest to repeatedly pay dividends that aren’t well covered by cashflow, we would consider this a warning sign.
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. For this reason, we’re glad to see Saltängen Property Invest’s earnings per share have risen 13% per annum over the last five years.
Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. It looks like the Saltängen Property Invest dividends are largely the same as they were four years ago.
The Bottom Line
Is Saltängen Property Invest worth buying for its dividend? We’re glad to see the company has been improving its earnings per share while also paying out a low percentage of income. However, it’s not great to see it paying out what we see as an uncomfortably high percentage of its cash flow. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we’re not all that optimistic on its dividend prospects.
Want to learn more about Saltängen Property Invest? Here’s a visualisation of its historical rate of revenue and earnings growth.
If you’re in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.