It Might Not Be A Great Idea To Buy Superior Group of Companies, Inc. (NASDAQ:SGC) For Its Next Dividend
Superior Group of Companies, Inc. (NASDAQ:SGC) is about to trade ex-dividend in the next 4 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase Superior Group of Companies' shares before the 18th of May in order to receive the dividend, which the company will pay on the 2nd of June.
The company's next dividend payment will be US$0.14 per share. Last year, in total, the company distributed US$0.56 to shareholders. Last year's total dividend payments show that Superior Group of Companies has a trailing yield of 6.7% on the current share price of $8.33. If you buy this business for its dividend, you should have an idea of whether Superior Group of Companies'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.
View our latest analysis for Superior Group of Companies
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. Superior Group of Companies lost money last year, so the fact that it's paying a dividend is certainly disconcerting. There might be a good reason for this, but we'd want to look into it further before getting comfortable. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. Fortunately, it paid out only 41% of its free cash flow in the past year.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Superior Group of Companies 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.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Superior Group of Companies has delivered an average of 7.6% per year annual increase in its dividend, based on the past 10 years of dividend payments.
Remember, you can always get a snapshot of Superior Group of Companies's financial health, by checking our visualisation of its financial health, here.
The Bottom Line
Has Superior Group of Companies got what it takes to maintain its dividend payments? We're a bit uncomfortable with it paying a dividend while being loss-making. However, we note that the dividend was covered by cash flow. It's not an attractive combination from a dividend perspective, and we're inclined to pass on this one for the time being.
So if you're still interested in Superior Group of Companies despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. Be aware that Superior Group of Companies is showing 3 warning signs in our investment analysis, and 1 of those makes us a bit uncomfortable...
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
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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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