It looks like Sagicor Financial Company Ltd. (TSE:SFC) is about to go ex-dividend in the next two days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. 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. Accordingly, Sagicor Financial investors that purchase the stock on or after the 23rd of May will not receive the dividend, which will be paid on the 14th of June.
The company's next dividend payment will be US$0.056 per share. Last year, in total, the company distributed US$0.23 to shareholders. Calculating the last year's worth of payments shows that Sagicor Financial has a trailing yield of 6.2% on the current share price of CA$4.88. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.
Check out our latest analysis for Sagicor Financial
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. Sagicor Financial paid out just 16% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Click here to see how much of its profit Sagicor Financial 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Sagicor Financial has grown its earnings rapidly, up 47% a year for the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. It looks like the Sagicor Financial dividends are largely the same as they were three years ago.
Final Takeaway
Is Sagicor Financial an attractive dividend stock, or better left on the shelf? Companies like Sagicor Financial that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. Overall, Sagicor Financial looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.