Avax S.A. (ATH:AVAX) Passed Our Checks, And It's About To Pay A €0.03 Dividend

Avax S.A. (ATH:AVAX) is about to trade ex-dividend in the next four 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 because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. This means that investors who purchase Avax's shares on or after the 29th of July will not receive the dividend, which will be paid on the 2nd of August.

The company's next dividend payment will be €0.03 per share. Last year, in total, the company distributed €0.03 to shareholders. Based on the last year's worth of payments, Avax has a trailing yield of 2.1% on the current stock price of €1.448. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Avax can afford its dividend, and if the dividend could grow.

See our latest analysis for Avax

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Avax's payout ratio is modest, at just 44% of profit. 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. What's good is that dividends were well covered by free cash flow, with the company paying out 21% of its cash flow last year.

It's positive to see that Avax'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 Avax 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 Avax has grown its earnings rapidly, up 56% a year for the past five years. Avax is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

Given that Avax has only been paying a dividend for a year, there's not much of a past history to draw insight from.

Final Takeaway

Is Avax an attractive dividend stock, or better left on the shelf? We love that Avax is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. There's a lot to like about Avax, and we would prioritise taking a closer look at it.

On that note, you'll want to research what risks Avax is facing. Every company has risks, and we've spotted 2 warning signs for Avax you should know about.

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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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com