Sabaf (BIT: SAB) could be a buy for his next dividend


It looks like Sabaf SpA (BIT: SAB) is set to be ex-dividend within the next four days. Typically, the ex-dividend date is one business day prior to the record date which is the date a company determines which shareholders are eligible to receive a dividend. The ex-dividend date is important because the settlement process involves two full business days. So if you miss this date, you would not appear on the company’s books on the date of registration. So you can buy Sabaf shares before May 31 in order to receive the dividend, which the company will pay on June 2.

The company’s next dividend will be € 0.55 per share, and over the past 12 months the company has paid a total of € 0.55 per share. Calculating the value of last year’s payouts shows that Sabaf has a final return of 2.3% on the current share price of € 24.2. Dividends contribute significantly to the return on investments for long-term holders, but only if the dividend continues to be paid. That is why we should always check whether dividend payments seem sustainable and whether the business is growing.

Check out our latest review for Sabaf

If a company pays more in dividends than it has earned, then the dividend can become unsustainable – hardly an ideal situation. Sabaf paid a comfortable 44% of its profits last year. Having said that, even very profitable companies can sometimes not generate enough cash to pay the dividend, which is why we always need to check if the dividend is covered by the cash flow. It paid more than half (53%) of its free cash flow in the past year, which is within an average range for most businesses.

It is positive to see that Sabaf’s 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 higher. safety margin before the dividend is reduced.

Click here to see how much of Sabaf’s profit has paid out in the past 12 months.

BIT: Historic SAB Dividend May 26, 2021

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to sell heavily at the same time. That’s why it’s a relief to see Sabaf’s earnings per share increase by 9.7% per year over the past five years. Decent historic growth in earnings per share suggests that Sabaf has indeed increased shareholder value. However, he now pays more than half of his profits as dividends. If management further increases the payout ratio, we will take this as an unspoken signal that the company’s growth prospects are slowing.

Most investors will primarily assess a company’s dividend prospects by checking the historical rate of dividend growth. Sabaf’s dividend payouts per share have declined 3.7% per year on average over the past 10 years, which is not interesting. Sabaf is a rare case where dividends decline as earnings per share improve. This is unusual to see and could indicate volatile conditions in the core business, or more rarely an increased focus on reinvesting profits.

To summarize

Is Sabaf worth buying for its dividend? The growth in earnings per share has been modest and it is interesting to note that Sabaf pays less than half of its earnings and more than half of its cash flow to shareholders in the form of dividends. Overall, we are not extremely bearish on the stock, but there are probably better dividend investments.

With this in mind, an essential part of thorough stock research is to be aware of all the risks that stocks currently face. To help you, we have discovered 2 warning signs for Sabaf which you should be aware of before investing in their stocks.

A common investment mistake is to buy the first interesting stock you see. Here you will find a list of promising dividend paying stocks with a yield above 2% and an upcoming dividend.

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This Simply Wall St article is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take into account your goals or your financial situation. We aim 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 information. Simply Wall St has no position in any of the stocks mentioned.
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