Yahoo Finance Why You Should Leave Strix Group Plc's (LON:KETL) Upcoming Dividend On The Shelf
Readers hoping to buy Strix Group Plc (LON:KETL) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. If you purchase the stock on or after the 7th of May, you won't be eligible to receive this dividend, when it is paid on the 3rd of June.
Strix Group's upcoming dividend is UK£0.051 a share, following on from the last 12 months, when the company distributed a total of UK£0.077 per share to shareholders. Looking at the last 12 months of distributions, Strix Group has a trailing yield of approximately 4.2% on its current stock price of £1.834. If you buy this business for its dividend, you should have an idea of whether Strix Group's dividend is reliable and sustainable. So we need to investigate whether Strix Group can afford its dividend, and if the dividend could grow.
Check out our latest analysis for Strix Group
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. Strix Group paid out more than half (68%) of its earnings last year, which is a regular payout ratio for most companies. A useful secondary check can be to evaluate whether Strix Group generated enough free cash flow to afford its dividend. Over the last year, it paid out more than three-quarters (77%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.
It's positive to see that Strix Group'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.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's not encouraging to see that Strix Group's earnings are effectively flat over the past three years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, three years ago, Strix Group has lifted its dividend by approximately 3.2% a year on average.
To Sum It Up
Has Strix Group got what it takes to maintain its dividend payments? While earnings per share are flat, at least Strix Group has not committed itself to an unsustainable dividend, with its earnings and cashflow payout ratios within reasonable bounds. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of Strix Group.
With that being said, if you're still considering Strix Group as an investment, you'll find it beneficial to know what risks this stock is facing. Every company has risks, and we've spotted 4 warning signs for Strix Group you should know about.
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.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
