Stock Spirits Group PLC (LON:STCK) stock is about to trade ex-dividend in 3 days time. This means that investors who purchase shares on or after the 30th of January will not receive the dividend, which will be paid on the 21st of February.
Stock Spirits Group's next dividend payment will be UK£0.063 per share, and in the last 12 months, the company paid a total of UK£0.089 per share. Based on the last year's worth of payments, Stock Spirits Group stock has a trailing yield of around 3.5% on the current share price of £2.16. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.
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. Stock Spirits Group is paying out an acceptable 63% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether Stock Spirits Group generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 40% of the free cash flow it generated, which is a comfortable payout ratio.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's not ideal to see Stock Spirits Group's earnings per share have been shrinking at 3.8% a year over the previous five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Stock Spirits Group has delivered 29% dividend growth per year on average over the past five years. Growing the dividend payout ratio while earnings are declining can deliver nice returns for a while, but it's always worth checking for when the company can't increase the payout ratio any more - because then the music stops.
The Bottom Line
Is Stock Spirits Group an attractive dividend stock, or better left on the shelf? We're not enthused by the declining earnings per share, although at least the company's payout ratio is within a reasonable range, meaning it may not be at imminent risk of a dividend cut. In summary, while it has some positive characteristics, we're not inclined to race out and buy Stock Spirits Group today.
Curious what other investors think of Stock Spirits Group? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting 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.