Should You Buy AB&Company Co.,Ltd. (TSE:9251) For Its Upcoming Dividend?
It looks like AB&Company Co.,Ltd. (TSE:9251) is about to go ex-dividend in the next four days. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. 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. In other words, investors can purchase AB&CompanyLtd's shares before the 29th of October in order to be eligible for the dividend, which will be paid on the 30th of January.
The company's next dividend payment will be JP¥60.00 per share, on the back of last year when the company paid a total of JP¥60.00 to shareholders. Calculating the last year's worth of payments shows that AB&CompanyLtd has a trailing yield of 3.9% on the current share price of JP¥1526.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. AB&CompanyLtd paid out 63% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether AB&CompanyLtd generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 29% of the free cash flow it generated, which is a comfortable payout ratio.
It's positive to see that AB&CompanyLtd'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 AB&CompanyLtd
Click here to see how much of its profit AB&CompanyLtd 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 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 AB&CompanyLtd's earnings per share have risen 19% per annum over the last five years. AB&CompanyLtd is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. This is a reasonable combination that could hint at some further dividend increases in the future.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last five years, AB&CompanyLtd has lifted its dividend by approximately 16% 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
Is AB&CompanyLtd an attractive dividend stock, or better left on the shelf? AB&CompanyLtd's growing earnings per share and conservative payout ratios make for a decent combination. We also like that it paid out a lower percentage of its cash flow. AB&CompanyLtd looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
While it's tempting to invest in AB&CompanyLtd for the dividends alone, you should always be mindful of the risks involved. For example - AB&CompanyLtd has 1 warning sign we think you should be aware of.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
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