Yahoo Finance Should You Buy Shoe Zone plc (LON:SHOE) For Its Upcoming Dividend?
Readers hoping to buy Shoe Zone plc (LON:SHOE) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. This means that investors who purchase Shoe Zone's shares on or after the 3rd of November will not receive the dividend, which will be paid on the 21st of December.
The company's next dividend payment will be UK£0.03 per share, and in the last 12 months, the company paid a total of UK£0.05 per share. Based on the last year's worth of payments, Shoe Zone stock has a trailing yield of around 3.4% on the current share price of £1.77. 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.
View our latest analysis for Shoe Zone
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Shoe Zone has a low and conservative payout ratio of just 10% of its income after tax.
Click here to see how much of its profit Shoe Zone 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. This is why it's a relief to see Shoe Zone earnings per share are up 7.7% per annum over the last five years. Earnings per share have been increasing steadily and management is reinvesting almost all of the profits back into the business. This is an attractive combination, because when profits are reinvested effectively, growth can compound, with corresponding benefits for earnings and dividends in the future.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last eight years, Shoe Zone has lifted its dividend by approximately 6.6% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
To Sum It Up
Is Shoe Zone worth buying for its dividend? It has been growing its earnings per share somewhat in recent years, although it reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. We think this is a pretty attractive combination, and would be interested in investigating Shoe Zone more closely.
On that note, you'll want to research what risks Shoe Zone is facing. For instance, we've identified 3 warning signs for Shoe Zone (1 is a bit concerning) 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.
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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.
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