We Wouldn't Be Too Quick To Buy Steadfast Group Limited (ASX:SDF) Before It Goes Ex-Dividend

Simply Wall St
·3 min read

It looks like Steadfast Group Limited (ASX:SDF) is about to go ex-dividend in the next three days. You can purchase shares before the 1st of March in order to receive the dividend, which the company will pay on the 25th of March.

Steadfast Group's next dividend payment will be AU$0.044 per share, on the back of last year when the company paid a total of AU$0.096 to shareholders. Last year's total dividend payments show that Steadfast Group has a trailing yield of 2.4% on the current share price of A$4. If you buy this business for its dividend, you should have an idea of whether Steadfast Group's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for Steadfast 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. Steadfast Group paid out 101% of its earnings, which is more than we're comfortable with, unless there are mitigating circumstances.

Generally, the higher a company's payout ratio, the more the dividend is at risk of being reduced.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

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Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Steadfast Group earnings per share are up 7.3% 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. Since the start of our data, seven years ago, Steadfast Group has lifted its dividend by approximately 15% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

The Bottom Line

From a dividend perspective, should investors buy or avoid Steadfast Group? Steadfast Group has been growing earnings per share at a reasonable rate, but over the last year its dividend was not well covered by earnings. These characteristics don't generally lead to outstanding dividend performance, and investors may not be happy with the results of owning this stock for its dividend.

Although, if you're still interested in Steadfast Group and want to know more, you'll find it very useful to know what risks this stock faces. For example, we've found 2 warning signs for Steadfast Group that we recommend you consider before investing in the business.

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.

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. 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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