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It looks like Superior Group of Companies, Inc. (NASDAQ:SGC) is about to go ex-dividend in the next 4 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Accordingly, Superior Group of Companies investors that purchase the stock on or after the 17th of May will not receive the dividend, which will be paid on the 3rd of June.
The company's next dividend payment will be US$0.14 per share, and in the last 12 months, the company paid a total of US$0.56 per share. Calculating the last year's worth of payments shows that Superior Group of Companies has a trailing yield of 2.9% on the current share price of US$19.03. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Superior Group of Companies can afford its dividend, and if the dividend could grow.
View our latest analysis for Superior Group of Companies
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. It paid out 76% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. We'd be concerned if earnings began to decline. 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. Luckily it paid out just 15% of its free cash flow last year.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
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. Superior Group of Companies's earnings per share have fallen at approximately 9.1% a year over the previous five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.