4imprint Group plc (LON:FOUR) stock is about to trade ex-dividend in 3 days time. You will need to purchase shares before the 9th of April to receive the dividend, which will be paid on the 15th of May.
4imprint Group's upcoming dividend is UK£0.46 a share, following on from the last 12 months, when the company distributed a total of UK£0.84 per share to shareholders. Last year's total dividend payments show that 4imprint Group has a trailing yield of 4.2% on the current share price of £16.38. 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.
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. 4imprint Group is paying out an acceptable 55% of its profit, a common payout level among most companies. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Over the last year it paid out 54% of its free cash flow as dividends, within the usual range for most companies.
It's positive to see that 4imprint 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.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see 4imprint Group's earnings have been skyrocketing, up 21% per annum for the past five years. Management appears to be striking a nice balance between reinvesting for growth and paying dividends to shareholders. With a reasonable payout ratio, profits being reinvested, and some earnings growth, 4imprint Group could have strong prospects for future increases to the dividend.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, ten years ago, 4imprint Group has lifted its dividend by approximately 16% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
To Sum It Up
Has 4imprint Group got what it takes to maintain its dividend payments? Higher earnings per share generally lead to higher dividends from dividend-paying stocks over the long run. That's why we're glad to see 4imprint Group's earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow - 55% and 54% respectively. To summarise, 4imprint Group looks okay on this analysis, although it doesn't appear a stand-out opportunity.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. To that end, you should learn about the 2 warning signs we've spotted with 4imprint Group (including 1 which makes us a bit uncomfortable).
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.
If you spot an error that warrants correction, please contact the editor at email@example.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.