Smartphoto Group NV (EBR:SMAR) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

Smartphoto Group NV (EBR:SMAR) is about to trade ex-dividend in the next 2 days. Ex-dividend means that investors that purchase the stock on or after the 18th of May will not receive this dividend, which will be paid on the 20th of May.

Smartphoto Group's next dividend payment will be €0.39 per share, on the back of last year when the company paid a total of €0.55 to shareholders. Based on the last year's worth of payments, Smartphoto Group has a trailing yield of 3.2% on the current stock price of €17. If you buy this business for its dividend, you should have an idea of whether Smartphoto Group's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Smartphoto Group

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Smartphoto Group paid out a comfortable 31% of its profit last year. 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. Thankfully its dividend payments took up just 28% of the free cash flow it generated, which is a comfortable payout ratio.

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

Click here to see how much of its profit Smartphoto Group paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Smartphoto Group has grown its earnings rapidly, up 105% a year for the past five years. Smartphoto Group is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.

Unfortunately Smartphoto Group has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

The Bottom Line

Should investors buy Smartphoto Group for the upcoming dividend? We love that Smartphoto Group is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. It's a promising combination that should mark this company worthy of closer attention.

On that note, you'll want to research what risks Smartphoto Group is facing. Our analysis shows 2 warning signs for Smartphoto Group and you should be aware of them before buying any shares.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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.

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