We Wouldn't Be Too Quick To Buy Asia Air Survey Co., Ltd. (TSE:9233) Before It Goes Ex-Dividend
Readers hoping to buy Asia Air Survey Co., Ltd. (TSE:9233) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. Therefore, if you purchase Asia Air Survey's shares on or after the 29th of September, you won't be eligible to receive the dividend, when it is paid on the 18th of December.
The company's next dividend payment will be JP¥24.00 per share, and in the last 12 months, the company paid a total of JP¥44.00 per share. Calculating the last year's worth of payments shows that Asia Air Survey has a trailing yield of 3.8% on the current share price of JP¥1162.00. 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.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Asia Air Survey paid out 55% of its earnings to investors last year, a normal payout level for most businesses. 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. Over the last year, it paid out dividends equivalent to 259% of what it generated in free cash flow, a disturbingly high percentage. It's pretty hard to pay out more than you earn, so we wonder how Asia Air Survey intends to continue funding this dividend, or if it could be forced to cut the payment.
Asia Air Survey does have a large net cash position on the balance sheet, which could fund large dividends for a time, if the company so chose. Still, smart investors know that it is better to assess dividends relative to the cash and profit generated by the business. Paying dividends out of cash on the balance sheet is not long-term sustainable.
Asia Air Survey paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Cash is king, as they say, and were Asia Air Survey to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.
View our latest analysis for Asia Air Survey
Click here to see how much of its profit Asia Air Survey 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That explains why we're not overly excited about Asia Air Survey's flat earnings over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Asia Air Survey has delivered 20% dividend growth per year on average over the past 10 years.
Final Takeaway
Should investors buy Asia Air Survey for the upcoming dividend? Earnings per share have not grown and Asia Air Survey's profit payout ratio looks reasonable. However, it paid out a disconcertingly high percentage of its cashflow, which is a worry. Overall it doesn't look like the most suitable dividend stock for a long-term buy and hold investor.
With that in mind though, if the poor dividend characteristics of Asia Air Survey don't faze you, it's worth being mindful of the risks involved with this business. Our analysis shows 2 warning signs for Asia Air Survey that we strongly recommend you have a look at before investing in the company.
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.