Simonds Farsons Cisk plc (MTSE:SFC) Goes Ex-Dividend Soon
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Simonds Farsons Cisk plc (MTSE:SFC) is about to go ex-dividend in just 2 days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Meaning, you will need to purchase Simonds Farsons Cisk's shares before the 6th of October to receive the dividend, which will be paid on the 21st of October.
The company's next dividend payment will be €0.07 per share. Last year, in total, the company distributed €0.21 to shareholders. Looking at the last 12 months of distributions, Simonds Farsons Cisk has a trailing yield of approximately 3.2% on its current stock price of €6.55. 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 from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Simonds Farsons Cisk paid out more than half (59%) of its earnings last year, which is a regular payout ratio for most companies. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out 91% of its free cash flow in the form of dividends last year, which is outside the comfort zone for most businesses. Companies usually need cash more than they need earnings - expenses don't pay themselves - so it's not great to see it paying out so much of its cash flow.
Simonds Farsons Cisk paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Cash is king, as they say, and were Simonds Farsons Cisk to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.
See our latest analysis for Simonds Farsons Cisk
Click here to see how much of its profit Simonds Farsons Cisk paid out over the last 12 months.
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 earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Simonds Farsons Cisk's earnings have been skyrocketing, up 32% per annum for the past five years. Earnings have been growing quickly, but we're concerned dividend payments consumed most of the company's cash flow over the past year.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Simonds Farsons Cisk has lifted its dividend by approximately 9.0% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
To Sum It Up
Should investors buy Simonds Farsons Cisk for the upcoming dividend? Earnings per share growth is a positive, and the company's payout ratio looks normal. However, we note Simonds Farsons Cisk paid out a much higher percentage of its free cash flow, which makes us uncomfortable. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.
If you're not too concerned about Simonds Farsons Cisk's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. Our analysis shows 1 warning sign for Simonds Farsons Cisk and you should be aware of it before buying any shares.
If you're in the market for strong dividend payers, we recommend checking 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.