Superior Group of Companies (NASDAQ:SGC) Has Affirmed Its Dividend Of $0.14
Superior Group of Companies, Inc. (NASDAQ:SGC) has announced that it will pay a dividend of $0.14 per share on the 2nd of June. This means the annual payment is 6.8% of the current stock price, which is above the average for the industry.
See our latest analysis for Superior Group of Companies
Superior Group of Companies Might Find It Hard To Continue The Dividend
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. While Superior Group of Companies is not profitable, it is paying out less than 75% of its free cash flow, which means that there is plenty left over for reinvestment into the business. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.
Looking forward, earnings per share is forecast to expand by 75.7% over the next year. It's encouraging to see things moving in the right direction, but this probably won't be enough for the company to turn a profit. The positive free cash flows give us some comfort, however, that the dividend could continue to be sustained.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2013, the dividend has gone from $0.27 total annually to $0.56. This implies that the company grew its distributions at a yearly rate of about 7.6% over that duration. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.
The Dividend Has Limited Growth Potential
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Superior Group of Companies' earnings per share has shrunk at 22% a year over the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.
The Dividend Could Prove To Be Unreliable
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would probably look elsewhere for an income investment.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. To that end, Superior Group of Companies has 3 warning signs (and 1 which is concerning) we think you should know about. Is Superior Group of Companies not quite the opportunity you were looking for? Why not check out our selection of top 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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