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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 Skellerup Holdings Limited (NZSE:SKL) is about to trade ex-dividend in the next four days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. 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. Therefore, if you purchase Skellerup Holdings' shares on or after the 6th of March, you won't be eligible to receive the dividend, when it is paid on the 20th of March.
The company's next dividend payment will be NZ$0.0979411 per share, and in the last 12 months, the company paid a total of NZ$0.24 per share. Looking at the last 12 months of distributions, Skellerup Holdings has a trailing yield of approximately 4.7% on its current stock price of NZ$5.08. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Skellerup Holdings has been able to grow its dividends, or if the dividend might be cut.
Check out our latest analysis for Skellerup Holdings
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Last year, Skellerup Holdings paid out 97% of its income as dividends, which is above a level that we're comfortable with, especially if the company needs to reinvest in its business. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Over the last year, it paid out more than three-quarters (82%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.
It's good to see that while Skellerup Holdings's dividends were not well covered by profits, at least they are affordable from a cash perspective. Still, if this were to happen repeatedly, we'd be concerned about whether the dividend is sustainable in a downturn.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, Skellerup Holdings's earnings per share have been growing at 11% a year for the past five years.