We Wouldn't Be Too Quick To Buy ABC arbitrage SA (EPA:ABCA) Before It Goes Ex-Dividend

ABC arbitrage SA (EPA:ABCA) stock is about to trade ex-dividend in three 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 important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. In other words, investors can purchase ABC arbitrage's shares before the 3rd of December in order to be eligible for the dividend, which will be paid on the 5th of December.

The company's next dividend payment will be €0.10 per share, and in the last 12 months, the company paid a total of €0.44 per share. Last year's total dividend payments show that ABC arbitrage has a trailing yield of 9.0% on the current share price of €4.90. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. 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 ABC arbitrage

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. ABC arbitrage is paying out an acceptable 72% of its profit, a common payout level among most companies.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

Click here to see how much of its profit ABC arbitrage paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. So we're not too excited that ABC arbitrage's earnings are down 3.9% a year over the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. ABC arbitrage has delivered an average of 1.0% per year annual increase in its dividend, based on the past 10 years of dividend payments.

The Bottom Line

Has ABC arbitrage got what it takes to maintain its dividend payments? We're not overly enthused to see ABC arbitrage's earnings in retreat at the same time as the company is paying out more than half of its earnings as dividends to shareholders. All things considered, we're not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.

Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with ABC arbitrage. For example, we've found 1 warning sign for ABC arbitrage that we recommend you consider before investing in the business.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.