It looks like S&U plc (LON:SUS) is about to go ex-dividend in the next 3 days. Investors can purchase shares before the 24th of October in order to be eligible for this dividend, which will be paid on the 15th of November.
S&U's next dividend payment will be UK£0.3 per share, and in the last 12 months, the company paid a total of UK£1.2 per share. Looking at the last 12 months of distributions, S&U has a trailing yield of approximately 5.6% on its current stock price of £21. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are 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. S&U is paying out an acceptable 51% of its profit, a common payout level among most companies.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see S&U's earnings per share have risen 16% per annum over the last five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. S&U has delivered 14% dividend growth per year on average over the past ten years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
The Bottom Line
From a dividend perspective, should investors buy or avoid S&U? Earnings per share are growing nicely, and S&U is paying out a percentage of its earnings that is around the average for dividend-paying stocks. Overall, S&U looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
Curious what other investors think of S&U? 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.
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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. Thank you for reading.