There's A Lot To Like About Lime Technologies' (STO:LIME) Upcoming kr01.75 Dividend

Readers hoping to buy Lime Technologies AB (publ) (STO:LIME) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Accordingly, Lime Technologies investors that purchase the stock on or after the 28th of October will not receive the dividend, which will be paid on the 1st of November.

The company's upcoming dividend is kr01.75 a share, following on from the last 12 months, when the company distributed a total of kr3.50 per share to shareholders. Based on the last year's worth of payments, Lime Technologies has a trailing yield of 1.0% on the current stock price of kr0339.50. If you buy this business for its dividend, you should have an idea of whether Lime Technologies's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Lime Technologies

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. Lime Technologies is paying out an acceptable 52% of its profit, a common payout level among most companies. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It paid out 15% of its free cash flow as dividends last year, which is conservatively low.

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 the company's payout ratio, plus analyst estimates of its future dividends.

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 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 Lime Technologies's earnings have been skyrocketing, up 28% per annum for the past five years. Management appears to be striking a nice balance between reinvesting for growth and paying dividends to shareholders. 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. In the past five years, Lime Technologies has increased its dividend at approximately 28% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

To Sum It Up

Has Lime Technologies got what it takes to maintain its dividend payments? Lime Technologies's growing earnings per share and conservative payout ratios make for a decent combination. We also like that it paid out a lower percentage of its cash flow. Overall we think this is an attractive combination and worthy of further research.

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

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.