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Trelleborg (STO:TREL B) could be a buy for its upcoming dividend

Vaseline 2 months ago

Readers hoping to buy Trelleborg AB (publ) (STO:TREL B) for its dividend will need to take action soon as the stock is about to trade ex-dividend. The ex-dividend date is one business day before a company’s record date. This is the date on which the company determines which shareholders are entitled to dividends. The ex-dividend date is an important date to pay attention to, as any purchase of shares on or after this date could mean a late settlement that will not be reflected on the record date. This means that you must purchase Trelleborg shares before April 25th to receive the dividend, which will be paid on May 2nd.

The company’s next dividend payment will be kr06.75 per share, and in the last twelve months the company has paid out a total of kr6.75 per share. Calculating the last year’s worth of payments shows that Trelleborg has a rolling yield of 1.8% on the current share price of kr0376.20. We like to see companies paying a dividend, but it’s also important to make sure that laying the golden eggs won’t kill our golden goose! So we need to check whether dividend payments are covered and whether profits are growing.

Check out our latest analysis for Trelleborg

If a company pays more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. Fortunately, Trelleborg’s payout ratio is modest, at just 49% of profits. A useful secondary check can be to evaluate whether Trelleborg generated enough free cash flow to pay its dividend. The good news is that the company paid out just 7.8% of its free cash flow over the last year.

It’s encouraging to see that the dividend is covered by both profits and cash flow. This generally suggests the dividend is sustainable, as long as earnings don’t drop precipitously.

Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.

historic dividend
OM:TREL B Historical dividend April 21, 2024

Have profits and dividends grown?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they typically find it easier to grow their dividends per share. If the business sector enters a recession and the dividend is cut, the company could see its value drop precipitously. That’s why it’s a relief to see that Trelleborg’s earnings per share have grown 4.3% per year over the past five years. Recent earnings growth has been limited. However, companies that slow their growth can often choose to pay out a larger percentage of profits to shareholders, which could keep the dividend increasing.

The main way most investors will assess a company’s dividend prospects is to check the historical rate of dividend growth. Over the past decade, Trelleborg has increased its dividend by an average of about 8.4% per year. We’re glad to see dividends rising along with profits over a number of years, which could be a sign the company plans to share the growth with shareholders.

It comes down to

Does Trelleborg have what it takes to maintain its dividend payments? Earnings per share have grown moderately and Trelleborg is paying out less than half of its earnings and cash flow as dividends, which is an attractive combination because it suggests the company is investing in growth. It might be nice to see earnings grow faster, but Trelleborg is conservative with its dividend payments and could still perform decently over the long term. There’s a lot to like about Trelleborg, and we’d prioritize taking a closer look at it.

In that regard, you’ll want to investigate what risks Trelleborg faces. Example: We’ve seen it 1 warning sign for Trelleborg you have to take it into account.

If you’re looking for strong dividend payers, we recommend it View our selection of top dividend stocks.

Valuation is complex, but we help make it simple.

Invent or Trelleborg may be over or undervalued if you look at our comprehensive analysis, including fair value estimates, risks and cautions, dividends, insider transactions and financial health.

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This article from Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only an unbiased methodology and our articles are not intended as financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. We aim to provide you with targeted, long-term analysis based on fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or quality material. Simply Wall St has no positions in the stocks mentioned.