Southern Cross Electrical Engineering Limited (ASX:SXE) Looks Like A Good Stock, And It's Going Ex-Dividend Soon
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Southern Cross Electrical Engineering Limited (ASX:SXE) is about to trade ex-dividend in the next 4 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. 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. Accordingly, Southern Cross Electrical Engineering investors that purchase the stock on or after the 21st of March will not receive the dividend, which will be paid on the 5th of April.
The company's next dividend payment will be AU$0.01 per share, and in the last 12 months, the company paid a total of AU$0.05 per share. Looking at the last 12 months of distributions, Southern Cross Electrical Engineering has a trailing yield of approximately 7.6% on its current stock price of A$0.655. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether Southern Cross Electrical Engineering has been able to grow its dividends, or if the dividend might be cut.
View our latest analysis for Southern Cross Electrical Engineering
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Southern Cross Electrical Engineering paid out 68% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Fortunately, it paid out only 31% of its free cash flow in the past year.
It's positive to see that Southern Cross Electrical Engineering'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 Southern Cross Electrical Engineering paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, Southern Cross Electrical Engineering's earnings per share have been growing at 11% a year for the past five years. Southern Cross Electrical Engineering is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. This is a reasonable combination that could hint at some further dividend increases in the future.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Southern Cross Electrical Engineering has delivered 8.3% dividend growth per year on average over the past 10 years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
Has Southern Cross Electrical Engineering got what it takes to maintain its dividend payments? We like Southern Cross Electrical Engineering's growing earnings per share and the fact that - while its payout ratio is around average - it paid out a lower percentage of its cash flow. Southern Cross Electrical Engineering looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
On that note, you'll want to research what risks Southern Cross Electrical Engineering is facing. In terms of investment risks, we've identified 1 warning sign with Southern Cross Electrical Engineering and understanding them should be part of your investment process.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
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