Why You Might Be Interested In Sygnia Limited (JSE:SYG) For Its Upcoming Dividend

By
Simply Wall St
Published
December 24, 2021
JSE:SYG
Source: Shutterstock

Sygnia Limited (JSE:SYG) stock is about to trade ex-dividend in four days. 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase Sygnia's shares on or after the 29th of December, you won't be eligible to receive the dividend, when it is paid on the 3rd of January.

The company's next dividend payment will be R0.80 per share. Last year, in total, the company distributed R1.25 to shareholders. Based on the last year's worth of payments, Sygnia stock has a trailing yield of around 7.0% on the current share price of ZAR18.2. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for Sygnia

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Its dividend payout ratio is 80% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. We'd be concerned if earnings began to decline.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

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

historic-dividend
JSE:SYG Historic Dividend December 24th 2021

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. For this reason, we're glad to see Sygnia's earnings per share have risen 20% per annum over the last five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Sygnia has delivered an average of 17% per year annual increase in its dividend, based on the past six years of dividend payments. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

To Sum It Up

Is Sygnia an attractive dividend stock, or better left on the shelf? Earnings per share are growing at an attractive rate, and Sygnia is paying out a bit over half its profits. Overall, Sygnia looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

While it's tempting to invest in Sygnia for the dividends alone, you should always be mindful of the risks involved. Case in point: We've spotted 3 warning signs for Sygnia you should be aware of.

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.

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.

Make Confident Investment Decisions

Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.