Only Four Days Left To Cash In On Adacel Technologies' (ASX:ADA) Dividend
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Adacel Technologies Limited (ASX:ADA) is about to go ex-dividend in just 4 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Meaning, you will need to purchase Adacel Technologies' shares before the 31st of August to receive the dividend, which will be paid on the 15th of September.
The company's upcoming dividend is AU$0.033 a share, following on from the last 12 months, when the company distributed a total of AU$0.065 per share to shareholders. Looking at the last 12 months of distributions, Adacel Technologies has a trailing yield of approximately 4.9% on its current stock price of A$1.33. If you buy this business for its dividend, you should have an idea of whether Adacel Technologies's dividend is reliable and sustainable. As a result, readers should always check whether Adacel Technologies has been able to grow its dividends, or if the dividend might be cut.
Check out our latest analysis for Adacel Technologies
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. Adacel Technologies is paying out an acceptable 63% of its profit, a common payout level among most companies. 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 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.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. So we're not too excited that Adacel Technologies's earnings are down 3.8% a year over the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Adacel Technologies has delivered 23% dividend growth per year on average over the past seven years. Growing the dividend payout ratio while earnings are declining can deliver nice returns for a while, but it's always worth checking for when the company can't increase the payout ratio any more - because then the music stops.
The Bottom Line
Has Adacel Technologies got what it takes to maintain its dividend payments? The payout ratios are within a reasonable range, implying the dividend may be sustainable. Declining earnings are a serious concern, however, and could pose a threat to the dividend in future. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.
If you want to look further into Adacel Technologies, it's worth knowing the risks this business faces. We've identified 5 warning signs with Adacel Technologies (at least 1 which makes us a bit uncomfortable), 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.
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.
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