Why You Might Be Interested In AB&Company Co.,Ltd. (TSE:9251) For Its Upcoming Dividend

Readers hoping to buy AB&Company Co.,Ltd. (TSE:9251) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. 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 29th of January.

The company's next dividend payment will be JP¥28.07 per share, and in the last 12 months, the company paid a total of JP¥28.07 per share. Based on the last year's worth of payments, AB&CompanyLtd has a trailing yield of 2.8% on the current stock price of JP¥987.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether AB&CompanyLtd has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for AB&CompanyLtd

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. That's why it's good to see AB&CompanyLtd paying out a modest 38% of its earnings. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Luckily it paid out just 20% 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.

Click here to see how much of its profit AB&CompanyLtd 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. For this reason, we're glad to see AB&CompanyLtd's earnings per share have risen 12% 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. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. It looks like the AB&CompanyLtd dividends are largely the same as they were three years ago.

The Bottom Line

Should investors buy AB&CompanyLtd for the upcoming dividend? 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. It's a promising combination that should mark this company worthy of closer attention.

While it's tempting to invest in AB&CompanyLtd for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 3 warning signs for AB&CompanyLtd and you should be aware of these before buying any shares.

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.