Income Investors Should Know That Projektengagemang Sweden AB (publ) (STO:PENG B) Goes Ex-Dividend Soon

Projektengagemang Sweden AB (publ) (STO:PENG B) is about to trade ex-dividend in the next four days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company’s books in order to receive a dividend. 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. Meaning, you will need to purchase Projektengagemang Sweden’s shares before the 5th of May to receive the dividend, which will be paid on the 11th of May.

The company’s next dividend payment will be kr0.40 per share, on the back of last year when the company paid a total of kr0.40 to shareholders. Calculating the last year’s worth of payments shows that Projektengagemang Sweden has a trailing yield of 3.0% on the current share price of SEK13.5. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That’s why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Projektengagemang Sweden

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. Projektengagemang Sweden paid out a comfortable 43% of its profit last year. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. The good news is it paid out just 17% of its free cash flow in the last year.

It’s positive to see that Projektengagemang Sweden’s dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see how much of its profit Projektengagemang Sweden paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Projektengagemang Sweden’s earnings per share have fallen at approximately 16% a year over the previous five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. Projektengagemang Sweden’s dividend payments per share have declined at 20% per year on average over the past four years, which is uninspiring. It’s never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company’s health in an attempt to maintain it.

To Sum It Up

Is Projektengagemang Sweden worth buying for its dividend? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It’s definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. Overall, it’s not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

On that note, you’ll want to research what risks Projektengagemang Sweden is facing. Our analysis shows 4 warning signs for Projektengagemang Sweden and you should be aware of them before buying any shares.

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.