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Adacel Technologies Limited (ASX:ADA) Passed Our Checks, And It's About To Pay A AU$0.028 Dividend

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Simply Wall St
·4 min read
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It looks like Adacel Technologies Limited (ASX:ADA) is about to go ex-dividend in the next 4 days. Ex-dividend means that investors that purchase the stock on or after the 26th of February will not receive this dividend, which will be paid on the 15th of April.

Adacel Technologies's next dividend payment will be AU$0.028 per share, and in the last 12 months, the company paid a total of AU$0.055 per share. Based on the last year's worth of payments, Adacel Technologies stock has a trailing yield of around 5.7% on the current share price of A$0.96. If you buy this business for its dividend, you should have an idea of whether Adacel Technologies's dividend is reliable and sustainable. So we need to investigate whether Adacel Technologies can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Adacel Technologies

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. Adacel Technologies is paying out an acceptable 50% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether Adacel Technologies generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 26% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that Adacel Technologies'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 Adacel Technologies paid out over the last 12 months.

historic-dividend
historic-dividend

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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see Adacel Technologies's earnings per share have risen 11% per annum over the last five years. Adacel Technologies has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Adacel Technologies has delivered 24% dividend growth per year on average over the past six years. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

Final Takeaway

Is Adacel Technologies an attractive dividend stock, or better left on the shelf? We like Adacel Technologies's growing earnings per share and the fact that - while its payout ratio is around average - it paid out a lower percentage of its cash flow. There's a lot to like about Adacel Technologies, and we would prioritise taking a closer look at it.

On that note, you'll want to research what risks Adacel Technologies is facing. For example, Adacel Technologies has 4 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

This article by Simply Wall St is general in nature. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.