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Don't Race Out To Buy Steadfast Group Limited (ASX:SDF) Just Because It's Going Ex-Dividend

Simply Wall St

Steadfast Group Limited (ASX:SDF) is about to trade ex-dividend in the next 3 days. You can purchase shares before the 2nd of March in order to receive the dividend, which the company will pay on the 26th of March.

Steadfast Group's next dividend payment will be AU$0.036 per share, on the back of last year when the company paid a total of AU$0.089 to shareholders. Based on the last year's worth of payments, Steadfast Group stock has a trailing yield of around 2.4% on the current share price of A$3.67. If you buy this business for its dividend, you should have an idea of whether Steadfast Group's dividend is reliable and sustainable. So we need to investigate whether Steadfast Group can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Steadfast 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. Steadfast Group reported a loss after tax last year, which means it's paying a dividend despite being unprofitable. While this might be a one-off event, this is unlikely to be sustainable in the long term.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

ASX:SDF Historical Dividend Yield, February 27th 2020

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Steadfast Group reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.

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, six years ago, Steadfast Group has lifted its dividend by approximately 16% a year on average.

We update our analysis on Steadfast Group every 24 hours, so you can always get the latest insights on its financial health, here.

To Sum It Up

Has Steadfast Group got what it takes to maintain its dividend payments? It's definitely not great to see that it paid a dividend despite reporting a loss last year. Worse, the general trend in its earnings looks negative in recent times. These characteristics don't generally lead to outstanding dividend performance, and investors may not be happy with the results of owning this stock for its dividend.

Curious what other investors think of Steadfast Group? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.

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.