AcadeMedia AB (publ) (STO:ACAD) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

It looks like AcadeMedia AB (publ) (STO:ACAD) is about to go ex-dividend in the next 3 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 important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Meaning, you will need to purchase AcadeMedia's shares before the 27th of November to receive the dividend, which will be paid on the 3rd of December.

The company's upcoming dividend is kr02.25 a share, following on from the last 12 months, when the company distributed a total of kr2.25 per share to shareholders. Calculating the last year's worth of payments shows that AcadeMedia has a trailing yield of 2.2% on the current share price of kr0101.60. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

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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. That's why it's good to see AcadeMedia paying out a modest 27% of its earnings. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. The good news is it paid out just 5.1% of its free cash flow in the last year.

It's positive to see that AcadeMedia'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.

See our latest analysis for AcadeMedia

Click here to see how much of its profit AcadeMedia paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, AcadeMedia's earnings per share have been growing at 15% a year for the past five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last six years, AcadeMedia has lifted its dividend by approximately 10% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

The Bottom Line

Is AcadeMedia an attractive dividend stock, or better left on the shelf? AcadeMedia has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. It's a promising combination that should mark this company worthy of closer attention.

Want to learn more about AcadeMedia? Here's a visualisation of its historical rate of revenue and earnings growth.

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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.