Stock Analysis

Santam Ltd (JSE:SNT) Will Pay A R8.45 Dividend In Four Days

Source: Shutterstock

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Santam Ltd (JSE:SNT) is about to trade ex-dividend in the next 4 days. The ex-dividend date occurs one day 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Accordingly, Santam investors that purchase the stock on or after the 22nd of March will not receive the dividend, which will be paid on the 27th of March.

The company's upcoming dividend is R8.45 a share, following on from the last 12 months, when the company distributed a total of R13.07 per share to shareholders. Based on the last year's worth of payments, Santam has a trailing yield of 4.7% on the current stock price of ZAR277.88. If you buy this business for its dividend, you should have an idea of whether Santam's dividend is reliable and sustainable. So we need to investigate whether Santam can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Santam

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. Santam is paying out an acceptable 71% of its profit, a common payout level among most companies.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

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

JSE:SNT Historic Dividend March 17th 2023

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. With that in mind, we're encouraged by the steady growth at Santam, with earnings per share up 3.3% on average over the last five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Santam's dividend payments per share have declined at 0.7% per year on average over the past 10 years, which is uninspiring.

To Sum It Up

Is Santam worth buying for its dividend? Santam has been generating some growth in earnings per share while paying out more than half of its earnings to shareholders in the form of dividends. At best we would put it on a watch-list to see if business conditions improve, as it doesn't look like a clear opportunity right now.

With that being said, if dividends aren't your biggest concern with Santam, you should know about the other risks facing this business. Case in point: We've spotted 2 warning signs for Santam you should be aware of.

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

Valuation is complex, but we're helping make it simple.

Find out whether Santam is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis