Nordic Waterproofing Holding AB (publ) (STO:NWG) stock is about to trade ex-dividend in four days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company’s books in order to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company’s books on the record date. This means that investors who purchase Nordic Waterproofing Holding’s shares on or after the 28th of April will not receive the dividend, which will be paid on the 5th of May.
The company’s upcoming dividend is kr7.00 a share, following on from the last 12 months, when the company distributed a total of kr7.00 per share to shareholders. Looking at the last 12 months of distributions, Nordic Waterproofing Holding has a trailing yield of approximately 4.6% on its current stock price of SEK153.8. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Nordic Waterproofing Holding can afford its dividend, and if the dividend could grow.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Nordic Waterproofing Holding paid out 51% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether Nordic Waterproofing Holding generated enough free cash flow to afford its dividend. Over the last year it paid out 56% of its free cash flow as dividends, within the usual range for most companies.
It’s positive to see that Nordic Waterproofing Holding’s dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, Nordic Waterproofing Holding’s earnings per share have been growing at 20% a year for the past five years. Nordic Waterproofing Holding is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.
Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, six years ago, Nordic Waterproofing Holding has lifted its dividend by approximately 11% a year on average. It’s exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
To Sum It Up
From a dividend perspective, should investors buy or avoid Nordic Waterproofing Holding? Higher earnings per share generally lead to higher dividends from dividend-paying stocks over the long run. That’s why we’re glad to see Nordic Waterproofing Holding’s earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow – 51% and 56% respectively. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we’re not all that optimistic on its dividend prospects.
While it’s tempting to invest in Nordic Waterproofing Holding for the dividends alone, you should always be mindful of the risks involved. For example, we’ve found 2 warning signs for Nordic Waterproofing Holding that we recommend you consider before investing in the business.
Source : Simplywall.st