Stagecoach Group plc (LON:SGC) Goes Ex-Dividend In 3 Days
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 Stagecoach Group plc (LON:SGC) is about to go ex-dividend in just 3 days. You will need to purchase shares before the 23rd of January to receive the dividend, which will be paid on the 4th of March.
Stagecoach Group's upcoming dividend is UK£0.038 a share, following on from the last 12 months, when the company distributed a total of UK£0.077 per share to shareholders. Based on the last year's worth of payments, Stagecoach Group stock has a trailing yield of around 5.1% on the current share price of £1.524. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
See our latest analysis for Stagecoach Group
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. Fortunately Stagecoach Group's payout ratio is modest, at just 38% of profit. A useful secondary check can be to evaluate whether Stagecoach Group generated enough free cash flow to afford its dividend. Over the last year it paid out 51% of its free cash flow as dividends, within the usual range for most companies.
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.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's not ideal to see Stagecoach Group's earnings per share have been shrinking at 2.6% a year over the previous five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Stagecoach Group's dividend payments are effectively flat on where they were ten years ago. If a company's dividend stays flat while earnings are in decline, this is typically a sign that it is paying out a larger percentage of its earnings. This can become unsustainable if earnings fall far enough.
The Bottom Line
Is Stagecoach Group an attractive dividend stock, or better left on the shelf? Earnings per share have fallen significantly, although at least Stagecoach Group paid out less than half of its profits and free cash flow over the last year, leaving some margin of safety. All things considered, we are not particularly enthused about Stagecoach Group from a dividend perspective.
Ever wonder what the future holds for Stagecoach Group? See what the six analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
If you're in the market for dividend stocks, we recommend checking our list of top 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.
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