While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.Īnother key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Earnings growth has been slim and the company is paying out more than half of its earnings. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run. It's not encouraging to see that Shoprite Holdings's earnings are effectively flat over the past five years. If earnings fall far enough, the company could be forced to cut its dividend. Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. JSE:SHP Historic Dividend September 25th 2022 Have Earnings And Dividends Been Growing? It's positive to see that Shoprite Holdings'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.Ĭlick here to see the company's payout ratio, plus analyst estimates of its future dividends. Dividends consumed 71% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations. 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. Shoprite Holdings paid out more than half (57%) of its earnings last year, which is a regular payout ratio for most companies. If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. See our latest analysis for Shoprite Holdings So we need to investigate whether Shoprite Holdings can afford its dividend, and if the dividend could grow. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. Looking at the last 12 months of distributions, Shoprite Holdings has a trailing yield of approximately 2.7% on its current stock price of ZAR220.88. The company's upcoming dividend is R3.67 a share, following on from the last 12 months, when the company distributed a total of R6.00 per share to shareholders. Therefore, if you purchase Shoprite Holdings' shares on or after the 28th of September, you won't be eligible to receive the dividend, when it is paid on the 3rd of October. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a 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. Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Shoprite Holdings Limited ( JSE:SHP) is about to trade ex-dividend in the next 2 days.
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