It looks like Schweiter Technologies AG (VTX:SWTQ) is about to go ex-dividend in the next four 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 important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Meaning, you will need to purchase Schweiter Technologies' shares before the 11th of April to receive the dividend, which will be paid on the 15th of April.
The company's next dividend payment will be CHF015.00 per share, on the back of last year when the company paid a total of CHF15.00 to shareholders. Last year's total dividend payments show that Schweiter Technologies has a trailing yield of 4.3% on the current share price of CHF0347.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
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. Schweiter Technologies distributed an unsustainably high 161% of its profit as dividends to shareholders last year. Without extenuating circumstances, we'd consider the dividend at risk of a cut. 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. Fortunately, it paid out only 33% of its free cash flow in the past year.
It's good to see that while Schweiter Technologies's dividends were not covered by profits, at least they are affordable from a cash perspective. Still, if the company repeatedly paid a dividend greater than its profits, we'd be concerned. Very few companies are able to sustainably pay dividends larger than their reported earnings.
See our latest analysis for Schweiter Technologies
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. With that in mind, we're discomforted by Schweiter Technologies's 26% per annum decline in earnings in the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.