Why You Might Be Interested In Aallon Group Oyj (HEL:AALLON) For Its Upcoming Dividend

Aallon Group Oyj (HEL:AALLON) stock is about to trade ex-dividend in 3 days. Typically, the ex-dividend date is one business day 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Meaning, you will need to purchase Aallon Group Oyj's shares before the 21st of March to receive the dividend, which will be paid on the 2nd of April.

The company's next dividend payment will be €0.22 per share, and in the last 12 months, the company paid a total of €0.21 per share. Last year's total dividend payments show that Aallon Group Oyj has a trailing yield of 2.6% on the current share price of €8.50. If you buy this business for its dividend, you should have an idea of whether Aallon Group Oyj's dividend is reliable and sustainable. 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

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Aallon Group Oyj is paying out an acceptable 72% of its profit, a common payout level among most companies. 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 30% of the free cash flow it generated, which is a comfortable payout ratio.

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.

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?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Aallon Group Oyj has grown its earnings rapidly, up 38% a year for the past five years. 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.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, four years ago, Aallon Group Oyj has lifted its dividend by approximately 5.1% a year on average. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

Final Takeaway

Is Aallon Group Oyj an attractive dividend stock, or better left on the shelf? 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. Aallon Group Oyj looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. In terms of investment risks, we've identified 4 warning signs with Aallon Group Oyj and understanding them should be part of your investment process.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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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.