Be Sure To Check Out Aallon Group Oyj (HEL:AALLON) Before It Goes Ex-Dividend

Aallon Group Oyj (HEL:AALLON) is about to trade ex-dividend in the next three days. If you purchase the stock on or after the 19th of March, you won't be eligible to receive this dividend, when it is paid on the 1st of April.

Aallon Group Oyj's next dividend payment will be €0.19 per share. Last year, in total, the company distributed €0.19 to shareholders. Last year's total dividend payments show that Aallon Group Oyj has a trailing yield of 1.7% on the current share price of €10.9. 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.

View our latest analysis for Aallon Group Oyj

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. Aallon Group Oyj paid out 72% of its earnings to investors last year, a normal payout level for most businesses. 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. Thankfully its dividend payments took up just 34% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that Aallon Group Oyj'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.

Click here to see how much of its profit Aallon Group Oyj paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For that reason, it's encouraging to see Aallon Group Oyj's earnings over the past year have risen 140%. While we'd be remiss not to point out that a year is a very short time in dividend investing, it's an encouraging sign so far. The current payout ratio suggests a good balance between rewarding shareholders with dividends, and reinvesting in growth. Earnings per share have been growing quickly and in combination with some reinvestment and a middling payout ratio, the stock may have decent dividend prospects going forwards.

One year is a very short time frame in the pantheon of investing, so we wouldn't get too hung up on these numbers.

Unfortunately Aallon Group Oyj has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

The Bottom Line

Should investors buy Aallon Group Oyj for the upcoming dividend? We like Aallon Group Oyj's growing earnings per share and the fact that - while its payout ratio is around average - it paid out a lower percentage of its cash flow. Overall we think this is an attractive combination and worthy of further research.

On that note, you'll want to research what risks Aallon Group Oyj is facing. In terms of investment risks, we've identified 1 warning sign with Aallon Group Oyj and understanding them should be part of your investment process.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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