Do These 3 Checks Before Buying Sligro Food Group NV (AMS:SLIGR) For Its Upcoming Dividend

Sligro Food Group NV (AMS:SLIGR) is about to trade ex-dividend in the next 4 days. 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. This means that investors who purchase Sligro Food Group’s shares on or after the 20th of September will not receive the dividend, which will be paid on the 7th of October.

The company’s next dividend payment will be €0.30 per share. Last year, in total, the company distributed €0.60 to shareholders. Based on the last year’s worth of payments, Sligro Food Group has a trailing yield of 4.7% on the current stock price of €12.90. If you buy this business for its dividend, you should have an idea of ​​whether Sligro Food Group’s dividend is reliable and sustainable. That’s why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for Sligro Food Group

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. Sligro Food Group paid out a disturbingly high 375% of its profit as dividends last year, which makes us concerned there’s something we don’t fully understand in the business. Yet cash flows are even more than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Over the past year it paid out 163% of its free cash flow as dividends, which is uncomfortably high. We’re curious about why the company paid out more cash than it generated last year, since this can be one of the early signs that a dividend may be unsustainable.

As Sligro Food Group’s dividend was not well covered by either earnings or cash flow, we would be concerned that this dividend could be at risk over the long term.

Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Sligro Food Group’s earnings have collapsed faster than Wile E Coyote’s schemes to trap the Road Runner; down a tremendous 39% a year over the past five years.

Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. Sligro Food Group has seen its dividend decline 5.4% per annum on average over the past 10 years, which is not great to see. While it’s not great that earnings and dividends per share have fallen in recent years, we’re encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

Final Takeaway

Has Sligro Food Group got what it takes to maintain its dividend payments? Not only are earnings per share declining, but Sligro Food Group is paying out an uncomfortably high percentage of both its earnings and cashflow to shareholders as dividends. Unless there are grounds to believe a turnaround is imminent, this is one of the least attractive dividend stocks under this analysis. It’s not that we think Sligro Food Group is a bad company, but these characteristics don’t generally lead to outstanding dividend performance.

Having said that, if you’re looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with Sligro Food Group. Every company has risks, and we’ve spotted 4 warning signs for Sligro Food Group (of which 2 shouldn’t be ignored!) you should know about.

Generally, we wouldn’t recommend just buying the first dividend stock you see. Here’s a curated list of interesting stocks that are strong dividend payers.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.