Readers considering purchasing Strategic Education Co., Ltd. (NASDAQ:STRA) will need to act soon for its dividend, as the stock is about to trade ex-dividend. The ex-dividend date is typically set one business day before the record date. The record date is the deadline by which you must be listed on the company's books as a shareholder in order to receive dividends. When buying or selling stocks, the ex-dividend date is important because it takes at least two business days for the trade to settle. This means that investors who purchased Strategic Education shares after March 8th will not receive the dividend paid on March 18th.
The company's next dividend payment will be $0.60 per share, and in the last 12 months, the company paid a total of $2.40 per share. Based on the last year's worth of payments, Strategic Education has a current yield of 2.2% on the current stock price of $108.65. Dividends can be a significant contributor to investment returns for long-term holders, but only if they continue to be paid. Therefore, it is necessary to investigate whether strategic education can reap its dividends, and whether the dividends are likely to increase further.
Check out our latest analysis on strategic education.
Dividends are usually paid out of a company's profits. If a company pays more in dividends than it earned in profit, then the dividend might become unsustainable. It paid out 80% of its profits as dividends last year, which is not unreasonable, but limits reinvestment into the business and leaves the dividend vulnerable to economic downturns. There are concerns about the risk of a decline in profits. A useful secondary check is to assess whether Strategic Education generated enough free cash flow to pay its dividend. Last year, the company paid out 73% of its free cash flow as dividends, which is within the normal range for most companies.
It's reassuring 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 the company's payout ratio and analyst estimates of its future dividends.
Are profits and dividends growing?
Companies with consistently growing earnings per share usually make the best dividend stocks, as it is easier to grow dividends per share. If profits decline and the company is forced to cut its dividend, investors could see the value of their investments explode. That's why we're relieved to see Strategic Education's earnings per share have grown at 2.8% per year over the last five years. Payout ratios as high as 80% typically occur when a company cannot find a better use for its cash. Combined with slow revenue growth over the past few years, Strategic Education may be indicating that its future growth prospects are slim.
The main way most investors assess a company's dividend prospects is by looking at its historical dividend growth rate. Since we started tracking data seven years ago, Strategic Education has raised its dividend by an average of about 13% per year. We're glad to see dividends growing alongside profits over the years, and this could be a sign that the company intends to share its growth with shareholders.
final point
Should investors buy Strategic Education for its upcoming dividend? Earnings per share have been growing slowly, and Strategic Education paid out just over half of its profit and free cash flow last year. Overall, we're not too bearish on the stock, but there may be better dividend investments out there.
So if you want to know more about Strategic Education, you'll find it worth knowing the risks this stock faces. For example, strategic education includes: 1 warning sign I think you should know.
Generally speaking, we don't recommend just buying the first dividend stock you see.Here it is A curated list of interesting stocks with strong dividends.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodologies, and articles are not intended to be financial advice. This 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 long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.
