Readers hoping to buy UP Global Sourcing Holdings plc (LON:UPGS) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day 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 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 UP Global Sourcing Holdings' shares on or after the 6th of January, you won't be eligible to receive the dividend, when it is paid on the 28th of January.
The company's upcoming dividend is UK£0.033 a share, following on from the last 12 months, when the company distributed a total of UK£0.05 per share to shareholders. Last year's total dividend payments show that UP Global Sourcing Holdings has a trailing yield of 2.5% on the current share price of £2.04. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether UP Global Sourcing Holdings can afford its dividend, and if the dividend could grow.
See our latest analysis for UP Global Sourcing Holdings
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. UP Global Sourcing Holdings is paying out an acceptable 54% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether UP Global Sourcing Holdings generated enough free cash flow to afford its dividend. Over the last year it paid out 65% of its free cash flow as dividends, within the usual range for most companies.
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?
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 earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see UP Global Sourcing Holdings earnings per share are up 5.3% per annum over the last five years. While earnings have been growing at a credible rate, the company is paying out a majority of its earnings to shareholders. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.