Income Investors Should Know That AINAVO HOLDINGS Co.,Ltd. (TSE:7539) Goes Ex-Dividend Soon

It looks like AINAVO HOLDINGS Co.,Ltd. (TSE:7539) is about to go ex-dividend in the next 4 days. Typically, the ex-dividend date is two business days 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 can take two business days or more to settle. Meaning, you will need to purchase AINAVO HOLDINGSLtd's shares before the 28th of March to receive the dividend, which will be paid on the 3rd of June.

The company's upcoming dividend is JP¥12.00 a share, following on from the last 12 months, when the company distributed a total of JP¥12.00 per share to shareholders. Looking at the last 12 months of distributions, AINAVO HOLDINGSLtd has a trailing yield of approximately 1.9% on its current stock price of JP¥630.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Its dividend payout ratio is 83% 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. 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. The good news is it paid out just 19% of its free cash flow in the last year.

It's positive to see that AINAVO HOLDINGSLtd'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.

Check out our latest analysis for AINAVO HOLDINGSLtd

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

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. 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 AINAVO HOLDINGSLtd's earnings are down 3.3% 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. AINAVO HOLDINGSLtd's dividend payments are broadly unchanged compared to where they were 10 years ago. When earnings are declining yet the dividends are flat, typically the company is either paying out a higher portion of its earnings, or paying out of cash or debt on the balance sheet, neither of which is ideal.

Final Takeaway

Should investors buy AINAVO HOLDINGSLtd for the upcoming 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. In summary, it's hard to get excited about AINAVO HOLDINGSLtd from a dividend perspective.

With that being said, if dividends aren't your biggest concern with AINAVO HOLDINGSLtd, you should know about the other risks facing this business. Our analysis shows 3 warning signs for AINAVO HOLDINGSLtd that we strongly recommend you have a look at before investing in the company.

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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.