There's A Lot To Like About Adtec Plasma Technology's (TSE:6668) Upcoming JP¥11.00 Dividend

Readers hoping to buy Adtec Plasma Technology Co., Ltd. (TSE:6668) 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. 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 Adtec Plasma Technology's shares before the 28th of August in order to receive the dividend, which the company will pay on the 28th of November.

The company's upcoming dividend is JP¥11.00 a share, following on from the last 12 months, when the company distributed a total of JP¥21.00 per share to shareholders. Based on the last year's worth of payments, Adtec Plasma Technology stock has a trailing yield of around 1.6% on the current share price of JP¥1287.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Adtec Plasma Technology can afford its dividend, and if the dividend could grow.

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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. Adtec Plasma Technology has a low and conservative payout ratio of just 5.1% of its income after tax. 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 6.7% of its free cash flow as dividends last year, which is conservatively low.

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.

View our latest analysis for Adtec Plasma Technology

Click here to see how much of its profit Adtec Plasma Technology 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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Adtec Plasma Technology has grown its earnings rapidly, up 37% a year for the past five years. Adtec Plasma Technology looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Adtec Plasma Technology has delivered 18% dividend growth per year on average over the past 10 years. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

Final Takeaway

Has Adtec Plasma Technology got what it takes to maintain its dividend payments? We love that Adtec Plasma Technology is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. It's a promising combination that should mark this company worthy of closer attention.

While it's tempting to invest in Adtec Plasma Technology for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 1 warning sign for Adtec Plasma Technology and you should be aware of it before buying any shares.

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