Regular readers will know that we love our dividends at Simply Wall St, which is why it’s exciting to see Sunland Group Limited (ASX:SDG) is about to trade ex-dividend in the next 3 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company’s books to be eligible for a dividend payment. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn’t show on the record date. Therefore, if you purchase Sunland Group’s shares on or after the 30th of December, you won’t be eligible to receive the dividend, when it is paid on the 13th of January.
The company’s next dividend payment will be AU$0.10 per share, and in the last 12 months, the company paid a total of AU$0.12 per share. Looking at the last 12 months of distributions, Sunland Group has a trailing yield of approximately 4.1% on its current stock price of A$2.94. If you buy this business for its dividend, you should have an idea of whether Sunland Group’s dividend is reliable and sustainable. That’s why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Check out our latest analysis for Sunland Group
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Sunland Group paid out more than half (66%) of its earnings last year, which is a regular payout ratio for most companies. A useful secondary check can be to evaluate whether Sunland Group generated enough free cash flow to afford its dividend. It distributed 29% of its free cash flow as dividends, a comfortable payout level for most companies.
It’s positive to see that Sunland 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 how much of its profit Sunland Group paid out over the last 12 months.
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. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It’s not encouraging to see that Sunland Group’s earnings are effectively flat over the past five 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. In the last eight years, Sunland Group has lifted its dividend by approximately 25% a year on average.
Final Takeaway
From a dividend perspective, should investors buy or avoid Sunland Group? We’re not enthused by the flat earnings per share, although at least the company’s payout ratio is within reasonable bounds. Additionally, it paid out a lower percentage of its free cash flow, so at least it generated more cash than it spent on dividends. All things considered, we are not particularly enthused about Sunland Group from a dividend perspective.
With that being said, if dividends aren’t your biggest concern with Sunland Group, you should know about the other risks facing this business. Be aware that Sunland Group is showing 3 warning signs in our investment analysis, and 1 of those is concerning…
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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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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