Assessing the Dividend Sustainability Risk of Superior Group of Companies (SGC): A Financial Health Deep Dive

Investors seeking stable income often gravitate toward dividend-paying stocks, but the sustainability of those payouts hinges on a company's financial health. For Superior Group of Companies (SGC), the recent decline in revenue and profitability raises critical questions about its ability to maintain its $0.14-per-share quarterly dividend. This analysis evaluates SGC's dividend safety through the lens of leverage, liquidity, and operational performance, drawing on Q3 2025 results and broader financial trends.

Financial Performance: A Mixed Picture

Superior Group of Companies reported Q3 2025 net sales of $138.5 million, a 7.5% year-over-year decline, with Branded Products revenue falling to $85 million from $93 million in 2024 due to sales pull-forward and delayed ordering, according to a nasdaq.com press release. While gross margin held steady at 38.3%, net income plummeted to $2.7 million ($0.18 diluted EPS) from $5.4 million ($0.33 diluted EPS) in the prior year, as noted in the superiorgroupofcompanies.com results page. EBITDA also contracted to $7.5 million from $11.7 million, as reported in a seekingalpha.com article, signaling weakening profitability.

Despite these headwinds, management highlighted cost discipline, reducing SG&A expenses by $4 million year-over-year to $48 million, as detailed in a finance.yahoo.com earnings call summary. This improvement, coupled with a narrowed full-year revenue guidance of $560–$570 million (from $550–$575 million), suggests confidence in navigating market challenges, as noted in a stocktitan.net news post.

Leverage and Liquidity: A Tenuous Balance

SGC's debt metrics remain opaque, as its Q3 2025 report does not disclose a debt-to-EBITDA ratio, according to a nasdaq.com press release. However, using available data, we can estimate leverage. With $93.9 million in long-term debt, as reported on the superiorgroupofcompanies.com results page, and annualized EBITDA of approximately $30 million (based on Q3's $7.5 million and 2024's $34.1 million full-year figure, per the superiorgroupofcompanies.com Q4 2024 results), the implied debt-to-EBITDA ratio would hover near 3.0x-a level that raises concerns for dividend sustainability. For context, most analysts consider a debt-to-EBITDA ratio above 3.5x to be high risk, as described in an investopedia.com article.

Liquidity offers some reassurance: SGC held $17 million in cash and cash equivalents as of September 30, 2025, with over $100 million in total liquidity, according to the finance.yahoo.com earnings call summary. The company also amended its credit facility in March 2025 to allow $30 million in annual restricted payments, up from $20 million, as noted in the superiorgroupofcompanies.com Q4 2024 results, providing flexibility for dividends and share repurchases.

Dividend Coverage: A Precarious Payout Ratio

SGC's dividend payout ratio-a key metric for dividend safety-requires scrutiny. For Q3 2025, the company generated $7.5 million in EBITDA but paid $0.14 per share in dividends. Assuming 15.7 million diluted shares outstanding, as reported in a tradingview.com earnings summary, the quarterly dividend payout totaled $2.2 million. This implies a payout ratio of roughly 29% of EBITDA-a seemingly low figure. However, this calculation ignores interest expenses and other obligations.

A deeper look reveals a more fragile picture. SGC's net income of $2.7 million in Q3 2025 left minimal room for dividend payments, and the absence of a credit rating complicates assessments of its debt servicing capacity, as noted in the nasdaq.com press release. Without a clear credit rating, investors lack insight into whether SGC's leverage aligns with industry standards or if its debt structure exposes it to refinancing risks.

Risks and Outlook: Navigating Uncertainty

SGC's dividend sustainability hinges on its ability to reverse declining EBITDA and stabilize revenue. While management cites a "robust pipeline" and cost discipline as growth levers, as mentioned in the seekingalpha.com article, external factors like macroeconomic uncertainty and tariff impacts could further strain margins, as noted in the finance.yahoo.com earnings call summary. The lack of a public credit rating exacerbates these risks, as it prevents investors from benchmarking SGC's creditworthiness against peers.

Analysts remain cautiously optimistic, with a median 12-month price target of $18.00 and an average "buy" rating, as detailed in the tradingview.com earnings summary. However, this optimism appears disconnected from the company's deteriorating financial metrics. A dividend cut would likely follow if EBITDA fails to rebound in 2025.

Conclusion: A Dividend with Caveats

Superior Group of Companies' dividend appears sustainable in the short term, supported by liquidity and cost reductions. However, the lack of transparency around credit ratings and leverage ratios, coupled with declining EBITDA, introduces significant uncertainty. Investors should monitor Q4 2025 results closely and await the company's 2025 annual report for a clearer picture of its debt metrics and credit profile. Until then, SGC's dividend carries elevated risk, warranting a cautious approach.