Supply Network (ASX: SNL) could be a buy for its next dividend
It looks like Limited supply network (ASX: SNL) is set to be ex-dividend within the next 4 days. The ex-dividend date occurs one day before the record date, which is the day on which shareholders must be on the books of the company to receive a dividend. The ex-dividend date is an important date to know, as any purchase of shares made after this date may mean a late settlement which does not appear on the record date. This means that you will need to buy Supply Network shares by September 16 to receive the dividend, which will be paid on October 1.
The company’s next dividend payment will be A $ 0.12 per share, and over the past 12 months the company has paid a total of A $ 0.20 per share. Looking at the last 12 months of distributions, Supply Network has a rolling return of around 2.4% on its current price of A $ 8.25. Dividends are an important source of income for many shareholders, but the health of the business is crucial to sustaining these dividends. That is why we should always check whether dividend payments seem sustainable and whether the business is growing.
See our latest analysis for Supply Network
Dividends are usually paid out of business income, so if a business pays more than it earned, its dividend is usually at risk of being reduced. Supply Network pays an acceptable level of 59% of its profits, a payment level common to most businesses. Yet cash flow is still more important than earnings in valuing a dividend, so we need to see if the company has generated enough cash to pay for its distribution. It distributed 46% of its free cash flow in the form of dividends, a comfortable level of distribution for most companies.
It is positive to see that the Supply Network dividend is covered by both earnings and cash flow, as this is usually a sign that the dividend is sustainable, and a lower payout ratio usually suggests a larger margin. security before the dividend is cut.
Click here to see how much Profit Supply Network has paid in the past 12 months.
Have profits and dividends increased?
Companies with strong growth prospects generally make the best dividend payers because dividends are easier to grow when earnings per share improve. If profits fall enough, the company could be forced to cut its dividend. It is encouraging to see that Supply Network has grown its revenue rapidly, up 23% per year over the past five years. Management seems to strike a good balance between reinvesting for growth and paying dividends to shareholders. With a reasonable payout ratio, reinvested earnings, and some earnings growth, Supply Network could have good prospects for future dividend increases.
Most investors primarily assess a company’s dividend prospects by checking the historical rate of dividend growth. Over the past 10 years, Supply Network has increased its dividend by around 9.6% per year on average. We are happy to see dividends increasing alongside earnings over multiple years, which may be a sign that the company intends to share the growth with its shareholders.
Is Supply Network an attractive dividend-paying stock, or better left off the shelf? We like Supply Network’s growing earnings per share and the fact that while its payout ratio is average, it paid a lower percentage of its cash flow. Overall, we think this is an attractive combination worthy of further research.
In light of this, while Supply Network has an attractive dividend, it is worth knowing the risks associated with this stock. In terms of investment risks, we have identified 1 warning sign with Supply Network and understanding them should be part of your investment process.
If you are in the dividend-paying stock market, we recommend that you check out our list of the highest dividend-paying stocks with a yield above 2% and a future dividend.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in any of the stocks mentioned.
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