Stadio Holdings (JSE:SDO) Could Be A Buy For Its Upcoming Dividend

Readers hoping to buy Stadio Holdings Limited (JSE:SDO) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase Stadio Holdings' shares on or after the 23rd of April, you won't be eligible to receive the dividend, when it is paid on the 29th of April.

The company's upcoming dividend is R00.151 a share, following on from the last 12 months, when the company distributed a total of R0.15 per share to shareholders. Based on the last year's worth of payments, Stadio Holdings has a trailing yield of 2.0% on the current stock price of R07.46. If you buy this business for its dividend, you should have an idea of whether Stadio Holdings's dividend is reliable and sustainable. So we need to investigate whether Stadio Holdings can afford its dividend, and if the dividend could grow.

We check all companies for important risks. See what we found for Stadio Holdings in our free report.

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 Stadio Holdings's payout ratio is modest, at just 49% of profit. 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 distributed 34% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that Stadio Holdings'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.

See our latest analysis for Stadio Holdings

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

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. 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 Stadio Holdings's earnings have been skyrocketing, up 29% per annum for the past five years. Stadio Holdings is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. 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.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Stadio Holdings has delivered 48% dividend growth per year on average over the past three years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

To Sum It Up

Is Stadio Holdings worth buying for its dividend? Stadio Holdings 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 Stadio Holdings, and we would prioritise taking a closer look at it.

Keen to explore more data on Stadio Holdings's financial performance? Check out our visualisation of its historical revenue and earnings growth.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.