January 26, 2022

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Know This Before Buying SCR-Sibelco N.V. (EBR:094426466) For Its Dividend

Dividend paying stocks like SCR-Sibelco N.V. (EBR:094426466) tend to be popular with investors, and for good reason – some research suggests a significant amount of all stock market returns come from reinvested dividends. If you are hoping to live on the income from dividends, it’s important to be a lot more stringent with your investments than the average punter.

Investors might not know much about SCR-Sibelco’s dividend prospects, even though it has been paying dividends for the last four years and offers a 2.7% yield. A low yield is generally a turn-off, but if the prospects for earnings growth were strong, investors might be pleasantly surprised by the long-term results. Some simple analysis can reduce the risk of holding SCR-Sibelco for its dividend, and we’ll focus on the most important aspects below.

Explore this interactive chart for our latest analysis on SCR-Sibelco!

ENXTBR:094426466 Historical Dividend Yield, March 10th 2020

Payout ratios

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. As a result, we should always investigate whether a company can afford its dividend, measured as a percentage of a company’s net income after tax. While SCR-Sibelco pays a dividend, it reported a loss over the last year. When a company is loss-making, we next need to check to see if its cash flows can support the dividend.

Consider getting our latest analysis on SCR-Sibelco’s financial position here.

Dividend Volatility

Before buying a stock for its income, we want to see if the dividends have been stable in the past, and if the company has a track record of maintaining its dividend. Looking at the data, we can see that SCR-Sibelco has been paying a dividend for the past four years. The company has been paying a stable dividend for a few years now, but we’d like to see more evidence of consistency over a longer period. During the past four-year period, the first annual payment was €136 in 2016, compared to €163 last year. Dividends per share have grown at approximately 4.7% per year over this time.

We like that the dividend hasn’t been shrinking. However we’re conscious that the company hasn’t got an overly long track record of dividend payments yet, which makes us wary of relying on its dividend income.

Dividend Growth Potential

Dividend payments have been consistent over the past few years, but we should always check if earnings per share (EPS) are growing, as this will help maintain the purchasing power of the dividend. SCR-Sibelco’s earnings per share have fallen -231% over the past year. This is a pretty serious concern, and it would be worth investigating whether something fundamental in the business has changed – or broken. We do note though, one year is too short a time to be drawing strong conclusions about a company’s future prospects.

Conclusion

Dividend investors should always want to know if a) a company’s dividends are affordable, b) if there is a track record of consistent payments, and c) if the dividend is capable of growing. First, it’s not great to see a dividend being paid despite the company being unprofitable over the last year. Earnings per share are down, and to our mind SCR-Sibelco has not been paying a dividend long enough to demonstrate its resilience across economic cycles. In short, we’re not keen on SCR-Sibelco from a dividend perspective. Businesses can change, but we’ve spotted a few too many concerns with this one to get comfortable.

It’s important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we’ve identified 3 warning signs for SCR-Sibelco (1 is significant!) that you should be aware of before investing.

Looking for more high-yielding dividend ideas? Try our curated list of dividend stocks with a yield above 3%.

If you spot an error that warrants correction, please contact the editor at [email protected] This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.

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