Is It Smart To Buy Torslanda Property Investment AB (publ) (STO:TORSAB) Before It Goes Ex-Dividend?

Readers hoping to buy Torslanda Property Investment AB (publ) (STO:TORSAB) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. You will need to purchase shares before the 8th of January to receive the dividend, which will be paid on the 14th of January.

Torslanda Property Investment's next dividend payment will be kr0.22 per share, and in the last 12 months, the company paid a total of kr0.88 per share. Based on the last year's worth of payments, Torslanda Property Investment has a trailing yield of 5.9% on the current stock price of SEK15. 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! We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Torslanda Property Investment

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. Fortunately Torslanda Property Investment's payout ratio is modest, at just 45% of profit. A useful secondary check can be to evaluate whether Torslanda Property Investment generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 27% of the free cash flow it generated, which is a comfortable payout ratio.

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 how much of its profit Torslanda Property Investment 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see Torslanda Property Investment's earnings have been skyrocketing, up 33% per annum for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.

We'd also point out that Torslanda Property Investment issued a meaningful number of new shares in the past year. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, six years ago, Torslanda Property Investment has lifted its dividend by approximately 1.6% a year on average. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

Final Takeaway

From a dividend perspective, should investors buy or avoid Torslanda Property Investment? Torslanda Property Investment has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. There's a lot to like about Torslanda Property Investment, and we would prioritise taking a closer look at it.

In light of that, while Torslanda Property Investment has an appealing dividend, it's worth knowing the risks involved with this stock. To help with this, we've discovered 3 warning signs for Torslanda Property Investment (1 is concerning!) that you ought to be aware of before buying the shares.

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.

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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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