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Why You Should Leave SpartanNash Company (NASDAQ:SPTN)'s Upcoming Dividend On The Shelf

Simply Wall St

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see SpartanNash Company (NASDAQ:SPTN) is about to trade ex-dividend in the next 3 days. If you purchase the stock on or after the 9th of December, you won't be eligible to receive this dividend, when it is paid on the 31st of December.

SpartanNash's next dividend payment will be US$0.19 per share. Last year, in total, the company distributed US$0.76 to shareholders. Based on the last year's worth of payments, SpartanNash stock has a trailing yield of around 5.5% on the current share price of $13.86. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for SpartanNash

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. SpartanNash reported a loss last year, so it's not great to see that it has continued paying a dividend. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. 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 26% 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.

NasdaqGS:SPTN Historical Dividend Yield, December 5th 2019
NasdaqGS:SPTN Historical Dividend Yield, December 5th 2019

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. SpartanNash 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.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past ten years, SpartanNash has increased its dividend at approximately 14% a year on average.

We update our analysis on SpartanNash every 24 hours, so you can always get the latest insights on its financial health, here.

Final Takeaway

Has SpartanNash got what it takes to maintain its dividend payments? First, it's not great to see the company paying a dividend despite being loss-making over the last year. On the plus side, the dividend was covered by free 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.

Ever wonder what the future holds for SpartanNash? See what the four analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

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 editorial-team@simplywallst.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.