Is It Smart To Buy Asahi Group Holdings, Ltd. (TSE:2502) Before It Goes Ex-Dividend?

Asahi Group Holdings, Ltd. (TSE:2502) is about to trade ex-dividend in the next 3 days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. Therefore, if you purchase Asahi Group Holdings' shares on or after the 27th of June, you won't be eligible to receive the dividend, when it is paid on the 2nd of September.

The company's next dividend payment will be JP¥26.00 per share, on the back of last year when the company paid a total of JP¥52.00 to shareholders. Looking at the last 12 months of distributions, Asahi Group Holdings has a trailing yield of approximately 2.7% on its current stock price of JP¥1944.00. If you buy this business for its dividend, you should have an idea of whether Asahi Group Holdings's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

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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. Asahi Group Holdings paid out a comfortable 39% of its profit last year. A useful secondary check can be to evaluate whether Asahi Group Holdings generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 43% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that Asahi Group 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.

See our latest analysis for Asahi Group Holdings

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Asahi Group Holdings earnings per share are up 4.1% per annum over the last five years. Recent growth has not been impressive. Yet there are several ways to grow the dividend, and one of them is simply that the company may choose to pay out more of its earnings as dividends.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Asahi Group Holdings has delivered 13% dividend growth per year on average over the past 10 years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

Has Asahi Group Holdings got what it takes to maintain its dividend payments? Earnings per share have been growing moderately, and Asahi Group Holdings is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Asahi Group Holdings is halfway there. Asahi Group Holdings looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

In light of that, while Asahi Group Holdings has an appealing dividend, it's worth knowing the risks involved with this stock. Case in point: We've spotted 1 warning sign for Asahi Group Holdings you should be aware of.

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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.