It looks like Southern Cross Media Group Limited (ASX:SXL) is about to go ex-dividend in the next 3 days. This means that investors who purchase shares on or after the 6th of September will not receive the dividend, which will be paid on the 8th of October.
Southern Cross Media Group's next dividend payment will be AU$0.04 per share, and in the last 12 months, the company paid a total of AU$0.077 per share. Based on the last year's worth of payments, Southern Cross Media Group stock has a trailing yield of around 6.4% on the current share price of A$1.22. 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! We need to see whether the dividend is covered by earnings and if it's growing.
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. Southern Cross Media Group paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If Southern Cross Media Group didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. It paid out more than half (72%) of its free cash flow in the past year, which is within an average range for most companies.
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 fall far enough, the company could be forced to cut its dividend. Southern Cross Media Group reported a loss last year, but at least the general trend suggests its income has been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Southern Cross Media Group has seen its dividend decline 1.5% per annum on average over the past 10 years, which is not great to see.
Is Southern Cross Media Group worth buying for its dividend? It's hard to get used to Southern Cross Media Group paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Southern Cross Media Group's dividend merits.
Wondering what the future holds for Southern Cross Media Group? See what the five analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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