Adrad Holdings Limited (ASX:AHL) Stock Goes Ex-Dividend In Just Four Days

Readers hoping to buy Adrad Holdings Limited (ASX:AHL) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Thus, you can purchase Adrad Holdings' shares before the 18th of September in order to receive the dividend, which the company will pay on the 21st of October.

The company's next dividend payment will be AU$0.0256 per share. Last year, in total, the company distributed AU$0.04 to shareholders. Calculating the last year's worth of payments shows that Adrad Holdings has a trailing yield of 2.7% on the current share price of AU$1.485. If you buy this business for its dividend, you should have an idea of whether Adrad Holdings's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Adrad Holdings paid out a comfortable 49% of its profit last year. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. The good news is it paid out just 23% of its free cash flow in the last year.

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.

See our latest analysis for Adrad Holdings

Click here to see how much of its profit Adrad Holdings paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings fall far enough, the company could be forced to cut its dividend. That explains why we're not overly excited about Adrad Holdings's flat earnings over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, four years ago, Adrad Holdings has lifted its dividend by approximately 30% a year on average.

The Bottom Line

Is Adrad Holdings worth buying for its dividend? While it's not great to see that earnings per share are effectively flat over the four-year period we checked, at least the payout ratios are low and conservative. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

On that note, you'll want to research what risks Adrad Holdings is facing. For example - Adrad Holdings has 1 warning sign we think you should be aware of.

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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.