ASSA ABLOY AB (publ) (STO:ASSA B) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

It looks like ASSA ABLOY AB (publ) (STO:ASSA B) is about to go ex-dividend in the next three days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, ASSA ABLOY investors that purchase the stock on or after the 10th of November will not receive the dividend, which will be paid on the 16th of November.

The company's next dividend payment will be kr03.20 per share, on the back of last year when the company paid a total of kr6.40 to shareholders. Last year's total dividend payments show that ASSA ABLOY has a trailing yield of 1.6% on the current share price of kr0401.80. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

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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. Fortunately ASSA ABLOY's payout ratio is modest, at just 42% of profit. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It distributed 31% of its free cash flow as dividends, a comfortable payout level for most companies.

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.

Check out our latest analysis for ASSA ABLOY

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see ASSA ABLOY's earnings per share have risen 13% per annum over the last five years. Earnings per share are growing rapidly and the company is keeping more than half of its earnings within the business; an attractive combination which could suggest the company is focused on reinvesting to grow earnings further. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, ASSA ABLOY has lifted its dividend by approximately 9.2% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

Is ASSA ABLOY worth buying for its dividend? ASSA ABLOY has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. ASSA ABLOY looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

While it's tempting to invest in ASSA ABLOY for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 1 warning sign for ASSA ABLOY and you should be aware of it before buying any shares.

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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