Sapiens International Corporation S.A. (NASDAQ:SPNS) the stock is set to trade ex-dividend in 3 days. The ex-dividend date is usually one business day before the record date which is the latest date by which you must be present on the books of the company as a shareholder in order to receive the dividend. The ex-dividend date is an important date to know because any purchase of shares made on or after this date may mean late settlement that does not appear on the record date. Therefore, if you buy shares of Sapiens International on or after August 16, you will not be eligible to receive the dividend when it is paid on August 30.
The company’s next dividend payout will be $0.23 per share, following last year when the company paid a total of $0.46 to shareholders. Based on the value of last year’s payouts, Sapiens International stock has a yield of approximately 2.0% on the current stock price of $22.5. Dividends are an important source of income for many shareholders, but the health of the company is essential to sustaining those dividends. Therefore, readers should always check whether Sapiens International was able to increase its dividend or if the dividend could be reduced.
Check out our latest analysis for Sapiens International
Dividends are usually paid out of company earnings, so if a company pays out more than it has earned, its dividend is usually at risk of being reduced. Sapiens International has a low and conservative payout ratio of only 24% of its after-tax income. Still, cash flow is even more important than earnings in evaluating a dividend, so we need to see if the company has generated enough cash to pay its distribution. It paid out 10% of its free cash flow as dividends last year, which is conservatively low.
It is encouraging to see that the dividend is covered by both earnings and cash flow. This generally suggests that the dividend is sustainable, as long as earnings don’t drop precipitously.
Click here to see the company’s payout ratio, as well as analysts’ estimates of its future dividends.
Have earnings and dividends increased?
Companies with consistently rising earnings per share tend to create the best dividend-paying stocks because they generally find it easier to increase dividends per share. If earnings fall enough, the company could be forced to cut its dividend. Luckily for readers, Sapiens International’s earnings per share have grown 19% annually over the past five years. Earnings per share have grown rapidly, and the company is keeping the majority of its profits with the company. Fast-growing companies that reinvest heavily are attractive from a dividend perspective, especially since they can often increase the payout ratio later.
Most investors primarily gauge a company’s dividend prospects by checking the historical rate of dividend growth. Since our data began two years ago, Sapiens International has increased its dividend by around 81% per year on average. Earnings per share and dividends have both increased rapidly lately, which is great to see.
To sum up
Does Sapiens International have what it takes to maintain its dividend payments? Sapiens International has been growing its profits at a rapid pace and has a moderately low payout ratio, implying that it is reinvesting heavily in its business; a perfect combination. Sapiens International seems solid on this analysis overall, and we would definitely consider investigating it further.
With that in mind, an essential part of thorough stock research is being aware of all the risks that stocks currently face. For example, we found 1 warning sign for Sapiens International which we recommend you consider before investing in the company.
A common investment mistake is to buy the first good stock you see. Here you can find a complete list of high yielding dividend stocks.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.
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