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Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Spheria Emerging Companies Limited (ASX:SEC) is about to go ex-dividend in just 4 days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Meaning, you will need to purchase Spheria Emerging Companies' shares before the 24th of April to receive the dividend, which will be paid on the 15th of May.
The company's upcoming dividend is AU$0.035 a share, following on from the last 12 months, when the company distributed a total of AU$0.12 per share to shareholders. Calculating the last year's worth of payments shows that Spheria Emerging Companies has a trailing yield of 5.3% on the current share price of AU$2.27. If you buy this business for its dividend, you should have an idea of whether Spheria Emerging Companies's dividend is reliable and sustainable. As a result, readers should always check whether Spheria Emerging Companies has been able to grow its dividends, or if the dividend might be cut.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Its dividend payout ratio is 82% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. We'd be worried about the risk of a drop in earnings.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Check out our latest analysis for Spheria Emerging Companies
Click here to see how much of its profit Spheria Emerging Companies paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Spheria Emerging Companies's earnings have been skyrocketing, up 27% per annum for the past five years.