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ABC arbitrage SA (EPA:ABCA) stock is about to trade ex-dividend in 3 days time. If you purchase the stock on or after the 8th of October, you won't be eligible to receive this dividend, when it is paid on the 10th of October.
ABC arbitrage's next dividend payment will be €0.1 per share, and in the last 12 months, the company paid a total of €0.5 per share. Looking at the last 12 months of distributions, ABC arbitrage has a trailing yield of approximately 7.0% on its current stock price of €6.56. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.
View our latest analysis for ABC arbitrage
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. ABC arbitrage paid out 68% of its earnings to investors last year, a normal payout level for most businesses.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Click here to see how much of its profit ABC arbitrage 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, ABC arbitrage's earnings per share have been growing at 12% a year for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. ABC arbitrage has seen its dividend decline 4.8% per annum on average over the past ten years, which is not great to see. ABC arbitrage is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.
The Bottom Line
Is ABC arbitrage an attractive dividend stock, or better left on the shelf? Earnings per share are growing at an attractive rate, and ABC arbitrage is paying out a bit over half its profits. We think this is a pretty attractive combination, and would be interested in investigating ABC arbitrage more closely.
Curious about whether ABC arbitrage has been able to consistently generate growth? Here's a chart of its historical revenue and earnings growth.