A.D.Works Group Co.,Ltd. (TSE:2982) Looks Interesting, And It's About To Pay A Dividend

Readers hoping to buy A.D.Works Group Co.,Ltd. (TSE:2982) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. In other words, investors can purchase A.D.Works GroupLtd's shares before the 27th of June in order to be eligible for the dividend, which will be paid on the 11th of September.

The company's next dividend payment will be JP¥6.00 per share. Last year, in total, the company distributed JP¥12.00 to shareholders. Based on the last year's worth of payments, A.D.Works GroupLtd stock has a trailing yield of around 4.1% on the current share price of JP¥294.00. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. A.D.Works GroupLtd is paying out just 23% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. 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. Fortunately, it paid out only 35% of its free cash flow in the past 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 A.D.Works GroupLtd

Click here to see how much of its profit A.D.Works GroupLtd 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. That's why it's comforting to see A.D.Works GroupLtd's earnings have been skyrocketing, up 37% per annum for the past five years. A.D.Works GroupLtd is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, five years ago, A.D.Works GroupLtd has lifted its dividend by approximately 103% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

To Sum It Up

Is A.D.Works GroupLtd an attractive dividend stock, or better left on the shelf? A.D.Works GroupLtd has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past five years, but the conservative payout ratio makes the current dividend look sustainable. A.D.Works GroupLtd looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

On that note, you'll want to research what risks A.D.Works GroupLtd is facing. For example, we've found 3 warning signs for A.D.Works GroupLtd (1 is concerning!) that deserve your attention before investing in the 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.