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Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Strix Group Plc (LON:KETL) is about to trade ex-dividend in the next 3 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase Strix Group's shares before the 30th of September in order to receive the dividend, which the company will pay on the 7th of October.
The company's upcoming dividend is UK£0.028 a share, following on from the last 12 months, when the company distributed a total of UK£0.079 per share to shareholders. Based on the last year's worth of payments, Strix Group stock has a trailing yield of around 2.2% on the current share price of £3.615. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Strix Group has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for Strix Group
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. Strix Group paid out more than half (66%) of its earnings last year, which is a regular payout ratio for most companies. A useful secondary check can be to evaluate whether Strix Group generated enough free cash flow to afford its dividend. The company paid out 102% of its free cash flow over the last year, which we think is outside the ideal range for most businesses. Cash flows are usually much more volatile than earnings, so this could be a temporary effect - but we'd generally want look more closely here.
While Strix Group's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Cash is king, as they say, and were Strix Group to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. 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 Strix Group's earnings per share have been shrinking at 3.2% a year over the previous five years.