There's A Lot To Like About Acmos' (TSE:6888) Upcoming JP¥24.00 Dividend

Acmos Inc. (TSE:6888) stock is about to trade ex-dividend in 2 days. 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. Therefore, if you purchase Acmos' shares on or after the 27th of June, you won't be eligible to receive the dividend, when it is paid on the 29th of September.

The company's next dividend payment will be JP¥24.00 per share, and in the last 12 months, the company paid a total of JP¥24.00 per share. Based on the last year's worth of payments, Acmos stock has a trailing yield of around 4.1% on the current share price of JP¥587.00. If you buy this business for its dividend, you should have an idea of whether Acmos's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Acmos

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 Acmos paying out a modest 29% 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. It paid out more than half (67%) of its free cash flow in the past year, which is within an average range for most companies.

It's positive to see that Acmos'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.

Click here to see how much of its profit Acmos 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Acmos has grown its earnings rapidly, up 21% a year for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Acmos has delivered an average of 37% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

Final Takeaway

Should investors buy Acmos for the upcoming dividend? Earnings per share have grown at a nice rate in recent times and over the last year, Acmos paid out less than half its earnings and a bit over half its free cash flow. Acmos looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

While it's tempting to invest in Acmos for the dividends alone, you should always be mindful of the risks involved. In terms of investment risks, we've identified 2 warning signs with Acmos and understanding them should be part of your investment process.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.

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