There's A Lot To Like About AB&CompanyLtd's (TSE:9251) Upcoming JP¥60.00 Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see AB&Company Co.,Ltd. (TSE:9251) is about to trade ex-dividend in the next couple of 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 important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Thus, you can purchase AB&CompanyLtd's shares before the 30th of October in order to receive the dividend, which the company will pay on the 2nd of February.

The company's next dividend payment will be JP¥60.00 per share, and in the last 12 months, the company paid a total of JP¥28.07 per share. Looking at the last 12 months of distributions, AB&CompanyLtd has a trailing yield of approximately 2.1% on its current stock price of JP¥1320.00. 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 AB&CompanyLtd can afford its dividend, and if the dividend could grow.

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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. AB&CompanyLtd paid out a comfortable 39% of its profit last year. 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. Luckily it paid out just 16% of its free cash flow last year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

See our latest analysis for AB&CompanyLtd

Click here to see how much of its profit AB&CompanyLtd paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see AB&CompanyLtd's earnings per share have risen 11% per annum over the last five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. AB&CompanyLtd's dividend payments are effectively flat on where they were four years ago.

To Sum It Up

Has AB&CompanyLtd got what it takes to maintain its dividend payments? AB&CompanyLtd has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. Overall we think this is an attractive combination and worthy of further research.

In light of that, while AB&CompanyLtd has an appealing dividend, it's worth knowing the risks involved with this stock. To help with this, we've discovered 1 warning sign for AB&CompanyLtd that you should be aware of before investing in their shares.

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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.