Four Days Left Until AS ONE Corporation (TSE:7476) Trades Ex-Dividend

AS ONE Corporation (TSE:7476) is about to trade ex-dividend in the next four days. Typically, the ex-dividend date is one business day 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Thus, you can purchase AS ONE's shares before the 27th of September in order to receive the dividend, which the company will pay on the 4th of December.

The company's upcoming dividend is JP¥28.00 a share, following on from the last 12 months, when the company distributed a total of JP¥57.00 per share to shareholders. Based on the last year's worth of payments, AS ONE has a trailing yield of 2.0% on the current stock price of JP¥2853.00. 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.

View our latest analysis for AS ONE

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Last year AS ONE paid out 105% of its profits as dividends to shareholders, suggesting the dividend is not well covered by earnings. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Over the last year, it paid out more than three-quarters (83%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.

It's good to see that while AS ONE's dividends were not covered by profits, at least they are affordable from a cash perspective. If executives were to continue paying more in dividends than the company reported in profits, we'd view this as a warning sign. Extraordinarily few companies are capable of persistently paying a dividend that is greater than their profits.

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

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see AS ONE earnings per share are up 8.8% per annum over the last five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. AS ONE has delivered an average of 16% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

To Sum It Up

Should investors buy AS ONE for the upcoming dividend? While earnings per share have been growing slowly, AS ONE is paying out an uncomfortably high percentage of its earnings. However it did pay out a lower percentage of its cashflow. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of AS ONE.

With that being said, if you're still considering AS ONE as an investment, you'll find it beneficial to know what risks this stock is facing. For example - AS ONE has 1 warning sign we think you should be aware of.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.