Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Aspocomp Group Oyj (HEL:ACG1V) is about to trade ex-dividend in the next 4 days. Investors can purchase shares before the 3rd of April in order to be eligible for this dividend, which will be paid on the 15th of April.
Aspocomp Group Oyj's next dividend payment will be €0.15 per share, on the back of last year when the company paid a total of €0.15 to shareholders. Based on the last year's worth of payments, Aspocomp Group Oyj has a trailing yield of 4.1% on the current stock price of €3.63. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Aspocomp Group Oyj has been able to grow its dividends, or if the dividend might be cut.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Aspocomp Group Oyj paid out a comfortable 25% of its profit last year. 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. The company paid out 108% of its free cash flow over the last year, which we think is outside the ideal range for most businesses. Cash flows are usually much more volatile than earnings, so this could be a temporary effect - but we'd generally want look more closely here.
While Aspocomp Group Oyj'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 Aspocomp Group Oyj's ability to maintain its 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. That's why it's comforting to see Aspocomp Group Oyj's earnings have been skyrocketing, up 66% per annum 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.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Aspocomp Group Oyj has delivered an average of 46% per year annual increase in its dividend, based on the past two years of dividend payments. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
To Sum It Up
Has Aspocomp Group Oyj got what it takes to maintain its dividend payments? We like that Aspocomp Group Oyj has been successfully growing its earnings per share at a nice rate and reinvesting most of its profits in the business. However, we note the high cashflow payout ratio with some concern. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.
So while Aspocomp Group Oyj looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. In terms of investment risks, we've identified 3 warning signs with Aspocomp Group Oyj and understanding them should be part of your investment process.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned.
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