Vodacom Group Limited (JSE:VOD) Stock Goes Ex-Dividend In Just Four Days

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Vodacom Group Limited (JSE:VOD) is about to go ex-dividend in just 4 days. You will need to purchase shares before the 2nd of December to receive the dividend, which will be paid on the 7th of December.

Vodacom Group's next dividend payment will be R4.15 per share, and in the last 12 months, the company paid a total of R7.85 per share. Based on the last year's worth of payments, Vodacom Group has a trailing yield of 6.3% on the current stock price of ZAR125.6. If you buy this business for its dividend, you should have an idea of whether Vodacom Group's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Vodacom Group

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 81% 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. It could become a concern if earnings started to decline. 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. Over the last year, it paid out more than three-quarters (76%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.

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?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Vodacom Group earnings per share are up 3.2% per annum over the last five years. A payout ratio of 81% looks like a tacit signal from management that reinvestment opportunities in the business are low. In line with limited earnings growth in recent years, this is not the most appealing combination.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Vodacom Group has delivered 8.4% dividend growth per year on average over the past 10 years. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

To Sum It Up

Is Vodacom Group an attractive dividend stock, or better left on the shelf? Earnings per share have been growing modestly and Vodacom Group paid out a bit over half of its earnings and free cash flow last year. All things considered, we are not particularly enthused about Vodacom Group from a dividend perspective.

So if you want to do more digging on Vodacom Group, you'll find it worthwhile knowing the risks that this stock faces. To help with this, we've discovered 1 warning sign for Vodacom Group that you should be aware of before investing in their shares.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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