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Solid State plc (LON:SOLI) stock is about to trade ex-dividend in four days. Investors can purchase shares before the 3rd of September in order to be eligible for this dividend, which will be paid on the 23rd of September.
Solid State's next dividend payment will be UK£0.072 per share, and in the last 12 months, the company paid a total of UK£0.13 per share. Based on the last year's worth of payments, Solid State has a trailing yield of 2.0% on the current stock price of £6.37. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Check out our latest analysis for Solid State
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. Solid State paid out a comfortable 31% of its profit last year. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It paid out 17% of its free cash flow as dividends last year, which is conservatively low.
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 Solid State 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. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Solid State, with earnings per share up 2.9% on average over the last five years. Recent earnings growth has been limited. Yet there are several ways to grow the dividend, and one of them is simply that the company may choose to pay out more of its earnings as dividends.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Solid State has delivered 15% dividend growth per year on average over the past 10 years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.