Interested In Dabur India's (NSE:DABUR) Upcoming ₹5.50 Dividend? You Have Three Days Left
Dabur India Limited (NSE:DABUR) is about to trade ex-dividend in the next 3 days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Therefore, if you purchase Dabur India's shares on or after the 17th of July, you won't be eligible to receive the dividend, when it is paid on the 4th of September.
The company's upcoming dividend is ₹5.50 a share, following on from the last 12 months, when the company distributed a total of ₹8.25 per share to shareholders. Based on the last year's worth of payments, Dabur India has a trailing yield of 1.9% on the current stock price of ₹443.50. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Dabur India can afford its dividend, and if the dividend could grow.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. It paid out 77% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. It could become a concern if earnings started to decline. 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. Dividends consumed 66% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.
It's positive to see that Dabur India'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.
See our latest analysis for Dabur India
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're encouraged by the steady growth at Dabur India, with earnings per share up 2.2% on average over the last five years. A high payout ratio of 77% generally happens when a company can't find better uses for the cash. Combined with slim earnings growth in the past few years, Dabur India could be signalling that its future growth prospects are thin.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Dabur India has increased its dividend at approximately 14% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
To Sum It Up
Is Dabur India an attractive dividend stock, or better left on the shelf? Earnings per share have been growing modestly and Dabur India paid out a bit over half of its earnings and free cash flow last year. In summary, while it has some positive characteristics, we're not inclined to race out and buy Dabur India today.
So if you want to do more digging on Dabur India, you'll find it worthwhile knowing the risks that this stock faces. Our analysis shows 1 warning sign for Dabur India and you should be aware of it before buying any shares.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
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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.