Is It Smart To Buy Thangamayil Jewellery Limited (NSE:THANGAMAYL) Before It Goes Ex-Dividend?
Thangamayil Jewellery Limited (NSE:THANGAMAYL) stock is about to trade ex-dividend in 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. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Accordingly, Thangamayil Jewellery investors that purchase the stock on or after the 22nd of July will not receive the dividend, which will be paid on the 28th of August.
The company's next dividend payment will be ₹18.00 per share, on the back of last year when the company paid a total of ₹18.00 to shareholders. Last year's total dividend payments show that Thangamayil Jewellery has a trailing yield of 0.3% on the current share price of ₹6436.00. 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 check whether the dividend payments are covered, and if earnings are 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. Thangamayil Jewellery paid out just 16% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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. What's good is that dividends were well covered by free cash flow, with the company paying out 16% of its cash flow last year.
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 Thangamayil Jewellery
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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Thangamayil Jewellery has grown its earnings rapidly, up 29% a year for the past five years. Thangamayil Jewellery looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Thangamayil Jewellery has delivered 43% dividend growth per year on average over the past 10 years. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
To Sum It Up
Has Thangamayil Jewellery got what it takes to maintain its dividend payments? We love that Thangamayil Jewellery is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. Thangamayil Jewellery looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
While it's tempting to invest in Thangamayil Jewellery for the dividends alone, you should always be mindful of the risks involved. For example, we've found 2 warning signs for Thangamayil Jewellery that we recommend you consider before investing in the business.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.