There's A Lot To Like About Synsam's (STO:SYNSAM) Upcoming kr01.80 Dividend

Synsam AB (publ) (STO:SYNSAM) is about to trade ex-dividend in the next 2 days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Thus, you can purchase Synsam's shares before the 24th of April in order to receive the dividend, which the company will pay on the 30th of April.

The company's next dividend payment will be kr01.80 per share. Last year, in total, the company distributed kr1.80 to shareholders. Based on the last year's worth of payments, Synsam stock has a trailing yield of around 4.1% on the current share price of kr044.40. 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! So we need to investigate whether Synsam can afford its dividend, and if the dividend could grow.

Our free stock report includes 1 warning sign investors should be aware of before investing in Synsam. Read for free now.

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. Synsam paid out 73% of its earnings to investors last year, a normal payout level for most businesses. 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. Fortunately, it paid out only 48% of its free cash flow in the past year.

It's positive to see that Synsam'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.

Check out our latest analysis for Synsam

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

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. It's encouraging to see Synsam has grown its earnings rapidly, up 59% a year for the past five years. The current payout ratio suggests a good balance between rewarding shareholders with dividends, and reinvesting in growth. Earnings per share have been growing quickly and in combination with some reinvestment and a middling payout ratio, the stock may have decent dividend prospects going forwards.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, three years ago, Synsam has lifted its dividend by approximately 1.9% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Synsam is keeping back more of its profits to grow the business.

Final Takeaway

Should investors buy Synsam for the upcoming dividend? We like Synsam's growing earnings per share and the fact that - while its payout ratio is around average - it paid out a lower percentage of its cash flow. There's a lot to like about Synsam, and we would prioritise taking a closer look at it.

While it's tempting to invest in Synsam for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 1 warning sign for Synsam and you should be aware of this before buying any shares.

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.