Do These 3 Checks Before Buying Swiss Prime Site AG (VTX:SPSN) For Its Upcoming Dividend
Swiss Prime Site AG (VTX:SPSN) stock is about to trade ex-dividend in three days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. In other words, investors can purchase Swiss Prime Site's shares before the 26th of March in order to be eligible for the dividend, which will be paid on the 28th of March.
The company's next dividend payment will be CHF03.40 per share, and in the last 12 months, the company paid a total of CHF3.40 per share. Looking at the last 12 months of distributions, Swiss Prime Site has a trailing yield of approximately 3.9% on its current stock price of CHF087.70. If you buy this business for its dividend, you should have an idea of whether Swiss Prime Site's dividend is reliable and sustainable. As a result, readers should always check whether Swiss Prime Site has been able to grow its dividends, or if the dividend might be cut.
Check out our latest analysis for Swiss Prime Site
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. An unusually high payout ratio of 301% of its profit suggests something is happening other than the usual distribution of profits to shareholders. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Over the last year it paid out 61% of its free cash flow as dividends, within the usual range for most companies.
It's good to see that while Swiss Prime Site's dividends were not covered by profits, at least they are affordable from a cash perspective. Still, if the company repeatedly paid a dividend greater than its profits, we'd be concerned. Very few companies are able to sustainably pay dividends larger than their reported earnings.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Swiss Prime Site's earnings per share have fallen at approximately 23% a year over the previous five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Swiss Prime Site's dividend payments per share have declined at 0.6% per year on average over the past 10 years, which is uninspiring.
Final Takeaway
From a dividend perspective, should investors buy or avoid Swiss Prime Site? Earnings per share have been in decline, which is not encouraging. Additionally, Swiss Prime Site is paying out quite a high percentage of its earnings, and more than half its cash flow, so it's hard to evaluate whether the company is reinvesting enough in its business to improve its situation. It's not that we think Swiss Prime Site is a bad company, but these characteristics don't generally lead to outstanding dividend performance.
With that being said, if you're still considering Swiss Prime Site 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 Swiss Prime Site (of which 1 can't be ignored!) you should know about.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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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.
