Ain Holdings Inc. (TSE:9627) Looks Interesting, And It's About To Pay A Dividend

Ain Holdings Inc. (TSE:9627) is about to trade ex-dividend in the next 2 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled 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 Ain Holdings' shares before the 26th of April in order to be eligible for the dividend, which will be paid on the 31st of July.

The company's next dividend payment will be JP¥60.00 per share, on the back of last year when the company paid a total of JP¥60.00 to shareholders. Looking at the last 12 months of distributions, Ain Holdings has a trailing yield of approximately 1.0% on its current stock price of JP¥5925.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Ain Holdings

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. Ain Holdings is paying out just 19% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. 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 14% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that Ain Holdings'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 the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're not enthused to see that Ain Holdings's earnings per share have remained effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run. Ain Holdings is retaining more than three-quarters of its earnings and has a history of generating some growth in earnings. We think this is a reasonable combination.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Ain Holdings has increased its dividend at approximately 7.2% a year on average.

The Bottom Line

Should investors buy Ain Holdings for the upcoming dividend? The company has barely grown earnings per share over this time, but at least it's paying out a decently low percentage of its earnings and cashflow as dividends. This could suggest management is reinvesting in future growth opportunities. Generally we like to see both low payout ratios and strong earnings per share growth, but Ain Holdings is halfway there. Ain Holdings 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 1 warning sign with Ain Holdings and understanding them should be part of your investment process.

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.