Why You Might Be Interested In Adtec Plasma Technology Co., Ltd. (TSE:6668) For Its Upcoming Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Adtec Plasma Technology Co., Ltd. (TSE:6668) is about to go ex-dividend in just four 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. In other words, investors can purchase Adtec Plasma Technology's shares before the 27th of February in order to be eligible for the dividend, which will be paid on the 1st of May.

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¥22.00 per share to shareholders. Looking at the last 12 months of distributions, Adtec Plasma Technology has a trailing yield of approximately 1.5% on its current stock price of JP¥1514.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Adtec Plasma Technology can afford its dividend, and if the dividend could grow.

See our latest analysis for Adtec Plasma Technology

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. Adtec Plasma Technology is paying out just 12% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. A useful secondary check can be to evaluate whether Adtec Plasma Technology generated enough free cash flow to afford its dividend. Luckily it paid out just 9.0% of its free cash flow last year.

It's positive to see that Adtec Plasma Technology'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 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see Adtec Plasma Technology's earnings have been skyrocketing, up 33% per annum 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.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Adtec Plasma Technology has delivered an average of 27% 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.

To Sum It Up

From a dividend perspective, should investors buy or avoid Adtec Plasma Technology? 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. Adtec Plasma Technology looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

While it's tempting to invest in Adtec Plasma Technology for the dividends alone, you should always be mindful of the risks involved. For example, we've found 2 warning signs for Adtec Plasma Technology that we recommend you consider before investing in the business.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.