Why You Might Be Interested In ASSA ABLOY AB (publ) (STO:ASSA B) For Its Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see ASSA ABLOY AB (publ) (STO:ASSA B) is about to trade ex-dividend in the next 4 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. In other words, investors can purchase ASSA ABLOY's shares before the 8th of November in order to be eligible for the dividend, which will be paid on the 14th of November.

The company's next dividend payment will be kr02.70 per share, and in the last 12 months, the company paid a total of kr5.40 per share. Last year's total dividend payments show that ASSA ABLOY has a trailing yield of 1.6% on the current share price of kr0334.30. If you buy this business for its dividend, you should have an idea of whether ASSA ABLOY's dividend is reliable and sustainable. So we need to investigate whether ASSA ABLOY can afford its dividend, and if the dividend could grow.

See our latest analysis for ASSA ABLOY

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. That's why it's good to see ASSA ABLOY paying out a modest 39% 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 distributed 32% of its free cash flow as dividends, a comfortable payout level for most companies.

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.

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. 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 ASSA ABLOY has grown its earnings rapidly, up 41% a year for the past five years. ASSA ABLOY is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, ASSA ABLOY has lifted its dividend by approximately 11% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

To Sum It Up

Has ASSA ABLOY got what it takes to maintain its dividend payments? We love that ASSA ABLOY 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. ASSA ABLOY looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

While it's tempting to invest in ASSA ABLOY for the dividends alone, you should always be mindful of the risks involved. For example - ASSA ABLOY has 1 warning sign we think you should be aware of.

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.