Only Three Days Left To Cash In On Aallon Group Oyj's (HEL:AALLON) Dividend

By
Simply Wall St
Published
March 17, 2022
HLSE:AALLON
Source: Shutterstock

It looks like Aallon Group Oyj (HEL:AALLON) is about to go ex-dividend in the next 3 days. The ex-dividend date is one business day 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. 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. In other words, investors can purchase Aallon Group Oyj's shares before the 21st of March in order to be eligible for the dividend, which will be paid on the 4th of April.

The company's next dividend payment will be €0.20 per share, on the back of last year when the company paid a total of €0.20 to shareholders. Based on the last year's worth of payments, Aallon Group Oyj stock has a trailing yield of around 1.9% on the current share price of €10.4. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for Aallon Group Oyj

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Its dividend payout ratio is 82% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. We'd be worried about the risk of a drop in earnings. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Thankfully its dividend payments took up just 40% 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.

historic-dividend
HLSE:AALLON Historic Dividend March 17th 2022

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. As a result, it's definitely disappointing to see that earnings per share have declined 7.5% over the past year.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past two years, Aallon Group Oyj has increased its dividend at approximately 5.4% a year on average. That's intriguing, but the combination of growing dividends despite declining earnings can typically only be achieved by paying out a larger percentage of profits. Aallon Group Oyj is already paying out 82% of its profits, and with shrinking earnings we think it's unlikely that this dividend will grow quickly in the future.

Final Takeaway

Is Aallon Group Oyj worth buying for its dividend? We're not enthused by the declining earnings per share, although at least the company's payout ratio is within a reasonable range, meaning it may not be at imminent risk of a dividend cut. All things considered, we are not particularly enthused about Aallon Group Oyj from a dividend perspective.

If you're not too concerned about Aallon Group Oyj's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. For example - Aallon Group Oyj has 3 warning signs we think you should be aware of.

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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