ASBISc Enterprises Plc (WSE:ASB) Is About To Go Ex-Dividend, And It Pays A 6.3% Yield

ASBISc Enterprises Plc (WSE:ASB) stock is about to trade ex-dividend in four days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. This means that investors who purchase ASBISc Enterprises' shares on or after the 14th of November will not receive the dividend, which will be paid on the 27th of November.

The company's next dividend payment will be US$0.20 per share, and in the last 12 months, the company paid a total of US$0.50 per share. Last year's total dividend payments show that ASBISc Enterprises has a trailing yield of 6.3% on the current share price of zł28.88. If you buy this business for its dividend, you should have an idea of whether ASBISc Enterprises's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fortunately ASBISc Enterprises's payout ratio is modest, at just 31% of profit. A useful secondary check can be to evaluate whether ASBISc Enterprises generated enough free cash flow to afford its dividend. Over the last year, it paid out dividends equivalent to 233% of what it generated in free cash flow, a disturbingly high percentage. It's pretty hard to pay out more than you earn, so we wonder how ASBISc Enterprises intends to continue funding this dividend, or if it could be forced to cut the payment.

While ASBISc Enterprises's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Were this to happen repeatedly, this would be a risk to ASBISc Enterprises's ability to maintain its dividend.

See our latest analysis for ASBISc Enterprises

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

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 ASBISc Enterprises has grown its earnings rapidly, up 29% a year for the past five years. Earnings have been growing quickly, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. ASBISc Enterprises has delivered 42% dividend growth per year on average over the past eight years. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

Final Takeaway

Should investors buy ASBISc Enterprises for the upcoming dividend? We're glad to see the company has been improving its earnings per share while also paying out a low percentage of income. However, it's not great to see it paying out what we see as an uncomfortably high percentage of its cash flow. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

In light of that, while ASBISc Enterprises has an appealing dividend, it's worth knowing the risks involved with this stock. We've identified 2 warning signs with ASBISc Enterprises (at least 1 which can't be ignored), and understanding them should be part of your investment process.

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