Readers hoping to buy Stepan Company (NYSE:SCL) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is usually set to be one business day before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least one business day to settle. This means that investors who purchase Stepan's shares on or after the 3rd of March will not receive the dividend, which will be paid on the 14th of March.

The company's next dividend payment will be US$0.385 per share, and in the last 12 months, the company paid a total of US$1.54 per share. Calculating the last year's worth of payments shows that Stepan has a trailing yield of 2.4% on the current share price of US$63.37. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Stepan

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Stepan paid out more than half (68%) of its earnings last year, which is a regular payout ratio for most companies.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.NYSE:SCL Historic Dividend February 26th 2025

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're discomforted by Stepan's 13% per annum decline in earnings in the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Stepan has delivered 8.5% dividend growth per year on average over the past 10 years. Growing the dividend payout ratio while earnings are declining can deliver nice returns for a while, but it's always worth checking for when the company can't increase the payout ratio any more - because then the music stops.

Final Takeaway

Has Stepan got what it takes to maintain its dividend payments? We're not overly enthused to see Stepan's earnings in retreat at the same time as the company is paying out more than half of its earnings as dividends to shareholders. We think there are likely better opportunities out there.

Story Continues

If you're not too concerned about Stepan's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. In terms of investment risks, we've identified 2 warning signs with Stepan and understanding them should be part of your investment process.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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