ASSA ABLOY AB (publ) (STO:ASSA B) Looks Interesting, And It's About To Pay A Dividend

Readers hoping to buy ASSA ABLOY AB (publ) (STO:ASSA B) 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 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 ASSA ABLOY's shares on or after the 24th of April, you won't be eligible to receive the dividend, when it is paid on the 30th of April.

The company's next dividend payment will be kr02.95 per share, and in the last 12 months, the company paid a total of kr5.90 per share. Last year's total dividend payments show that ASSA ABLOY has a trailing yield of 2.1% on the current share price of kr0275.70. If you buy this business for its dividend, you should have an idea of whether ASSA ABLOY'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.

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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. ASSA ABLOY paid out a comfortable 42% of its profit last year. A useful secondary check can be to evaluate whether ASSA ABLOY generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 32% of the free cash flow it generated, which is a comfortable payout ratio.

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 ASSA ABLOY

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

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 fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at ASSA ABLOY, with earnings per share up 9.4% on average over the last five years. Management have been reinvested more than half of the company's earnings within the business, and the company has been able to grow earnings with this retained capital. We think this is generally an attractive combination, as dividends can grow through a combination of earnings growth and or a higher payout ratio over time.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, ASSA ABLOY has lifted its dividend by approximately 12% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

The Bottom Line

Has ASSA ABLOY got what it takes to maintain its dividend payments? Earnings per share have been growing moderately, and ASSA ABLOY is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. It might be nice to see earnings growing faster, but ASSA ABLOY is being conservative with its dividend payouts and could still perform reasonably over the long run. There's a lot to like about ASSA ABLOY, and we would prioritise taking a closer look at it.

So while ASSA ABLOY looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. To help with this, we've discovered 1 warning sign for ASSA ABLOY that you should be aware of before investing in their 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.