Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Akzo Nobel N.V. (AMS:AKZA) is about to trade ex-dividend in the next 3 days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. In other words, investors can purchase Akzo Nobel's shares before the 29th of April in order to be eligible for the dividend, which will be paid on the 7th of May.

The company's next dividend payment will be €1.54 per share, and in the last 12 months, the company paid a total of €1.98 per share. Based on the last year's worth of payments, Akzo Nobel stock has a trailing yield of around 3.5% on the current share price of €56.20. If you buy this business for its dividend, you should have an idea of whether Akzo Nobel's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

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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. Akzo Nobel paid out more than half (62%) of its earnings last year, which is a regular payout ratio for most companies. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out 86% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

See our latest analysis for Akzo Nobel

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.ENXTAM:AKZA Historic Dividend April 25th 2025

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Akzo Nobel, with earnings per share up 2.4% on average over the last five years. A high payout ratio of 62% generally happens when a company can't find better uses for the cash. Combined with slim earnings growth in the past few years, Akzo Nobel could be signalling that its future growth prospects are thin.

Story Continues

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Akzo Nobel has lifted its dividend by approximately 2.0% a year on average.

The Bottom Line

Has Akzo Nobel got what it takes to maintain its dividend payments? Earnings per share growth has been unremarkable, and while the company is paying out a majority of its earnings and cash flow in the form of dividends, the dividend payments don't appear excessive. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Akzo Nobel's dividend merits.

If you're not too concerned about Akzo Nobel's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. Our analysis shows 2 warning signs for Akzo Nobel that we strongly recommend you have a look at before investing in the company.

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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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