Interested In A&A Material's (TSE:5391) Upcoming JP¥30.00 Dividend? You Have Three Days Left

A&A Material Corporation (TSE:5391) 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. In other words, investors can purchase A&A Material's shares before the 27th of September in order to be eligible for the dividend, which will be paid on the 2nd of December.

The company's next dividend payment will be JP¥30.00 per share, and in the last 12 months, the company paid a total of JP¥60.00 per share. Based on the last year's worth of payments, A&A Material has a trailing yield of 5.0% on the current stock price of JP¥1211.00. 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! As a result, readers should always check whether A&A Material has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for A&A Material

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. A&A Material paid out just 22% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It paid out 24% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that A&A Material'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 A&A Material paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. So we're not too excited that A&A Material's earnings are down 2.6% a year over the past five years.

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, eight years ago, A&A Material has lifted its dividend by approximately 12% a year on average.

The Bottom Line

Should investors buy A&A Material for the upcoming dividend? A&A Material has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

While it's tempting to invest in A&A Material for the dividends alone, you should always be mindful of the risks involved. For example - A&A Material has 2 warning signs we think you should be aware of.

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.