Is It Smart To Buy Aditya Birla Sun Life AMC Limited (NSE:ABSLAMC) Before It Goes Ex-Dividend?
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Aditya Birla Sun Life AMC Limited (NSE:ABSLAMC) is about to trade ex-dividend in the next three days. The ex-dividend date is usually set to be two business days 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 important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase Aditya Birla Sun Life AMC's shares on or after the 22nd of July, you won't be eligible to receive the dividend, when it is paid on the 28th of August.
The company's next dividend payment will be ₹25.50 per share. Last year, in total, the company distributed ₹25.50 to shareholders. Based on the last year's worth of payments, Aditya Birla Sun Life AMC stock has a trailing yield of around 2.2% on the current share price of ₹1150.60. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
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. Its dividend payout ratio is 76% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. It could become a concern if earnings started to decline.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
View our latest analysis for Aditya Birla Sun Life AMC
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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, Aditya Birla Sun Life AMC's earnings per share have been growing at 13% a year for the past five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, five years ago, Aditya Birla Sun Life AMC has lifted its dividend by approximately 18% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
To Sum It Up
Should investors buy Aditya Birla Sun Life AMC for the upcoming dividend? Earnings per share are growing nicely, and Aditya Birla Sun Life AMC is paying out a percentage of its earnings that is around the average for dividend-paying stocks. We think this is a pretty attractive combination, and would be interested in investigating Aditya Birla Sun Life AMC more closely.
While it's tempting to invest in Aditya Birla Sun Life AMC for the dividends alone, you should always be mindful of the risks involved. Be aware that Aditya Birla Sun Life AMC is showing 2 warning signs in our investment analysis, and 1 of those is significant...
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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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.