Allied Telesis Holdings K.K (TSE:6835) Could Be A Buy For Its Upcoming Dividend

Allied Telesis Holdings K.K. (TSE:6835) stock is about to trade ex-dividend in four 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Meaning, you will need to purchase Allied Telesis Holdings K.K's shares before the 29th of December to receive the dividend, which will be paid on the 30th of March.

The company's upcoming dividend is JP¥6.00 a share, following on from the last 12 months, when the company distributed a total of JP¥6.00 per share to shareholders. Last year's total dividend payments show that Allied Telesis Holdings K.K has a trailing yield of 2.4% on the current share price of JP¥253.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Allied Telesis Holdings K.K can afford its dividend, and if the dividend could grow.

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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. Allied Telesis Holdings K.K paid out just 4.8% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether Allied Telesis Holdings K.K generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 1.8% of its cash flow last year.

It's positive to see that Allied Telesis Holdings K.K's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

View our latest analysis for Allied Telesis Holdings K.K

Click here to see how much of its profit Allied Telesis Holdings K.K 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 fall far enough, the company could be forced to cut its dividend. It's encouraging to see Allied Telesis Holdings K.K has grown its earnings rapidly, up 103% a year for the past five years. Allied Telesis Holdings K.K looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, two years ago, Allied Telesis Holdings K.K has lifted its dividend by approximately 145% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

Final Takeaway

Has Allied Telesis Holdings K.K got what it takes to maintain its dividend payments? We love that Allied Telesis Holdings K.K is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. Allied Telesis Holdings K.K looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

In light of that, while Allied Telesis Holdings K.K has an appealing dividend, it's worth knowing the risks involved with this stock. In terms of investment risks, we've identified 1 warning sign with Allied Telesis Holdings K.K and understanding them should be part of your investment process.

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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.