Should income investors watch ABC arbitrage SA (EPA:ABCA) ahead of its ex-dividend?

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Some investors rely on dividends to grow their wealth, and if you’re one of those dividend sleuths, you might be intrigued to know that ABC Arbitration SA (EPA: ABCA) is set to go ex-dividend in just three days. The ex-dividend date is usually one business day before the record date which is the latest date by which you must be present on the books of the company as a shareholder in order to receive the dividend. The ex-dividend date is important because each time a stock is bought or sold, the transaction takes at least two business days to settle. This means that investors who buy ABC arbitrage shares on or after April 20 will not receive the dividend, which will be paid on April 22.

The company’s next dividend payment will be €0.10 per share. Last year, in total, the company distributed €0.40 to shareholders. Calculating the value of last year’s payouts shows that ABC arbitrage has a rolling yield of 5.2% on the current share price of €7.7. If you’re buying this company for its dividend, you should have some idea of ​​the reliability and sustainability of ABC arbitrage’s dividend. We therefore need to check whether dividend payments are covered and whether profits are increasing.

Discover our latest analysis for ABC arbitrage

Dividends are usually paid out of company profits, so if a company pays out more than it has earned, its dividend is usually at risk of being reduced. ABC arbitrage paid out a comfortable 44% of its profit last year.

Generally speaking, the lower a company’s payout ratios, the more resilient its dividend tends to be.

Click here to see how much profit ABC Arbitrage has paid out over the past 12 months.

ENXTPA:ABCA Dividend History April 16, 2022

Have earnings and dividends increased?

Companies with declining profits are tricky from a dividend perspective. If earnings fall enough, the company could be forced to cut its dividend. That’s why it’s not ideal to see ABC arbitrage’s earnings per share contracting 2.1% annually over the past five years.

Many investors will gauge a company’s dividend yield by evaluating how much dividend payouts have changed over time. Dividend payouts per ABC arbitrage share have declined by an average of 3.1% per year over the past 10 years, which is not encouraging. While it’s not great that earnings and dividends per share have fallen in recent years, we’re encouraged that management has cut the dividend rather than risk overcommitting the company in a risky attempt to maintain shareholder returns.

To summarize

Should investors buy ABC arbitrage for the next dividend? Earnings per share have declined significantly in recent years, although we appreciate that the company has a low payout ratio. This might suggest that a dividend cut might not be a major risk in the near future. It doesn’t seem like an exceptional opportunity, but it might be worth a closer look.

That being said, if dividends aren’t your primary concern with ABC arbitrage, you need to be aware of the other risks this business faces. Example: we have identified 1 warning sign for ABC arbitrage you should be aware.

A common investment mistake is to buy the first good stock you see. Here you can find a complete list of high yielding dividend stocks.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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