Gandhar Oil Refinery (India) Limited (NSE:GANDHAR) Looks Interesting, And It's About To Pay A Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Gandhar Oil Refinery (India) Limited (NSE:GANDHAR) is about to trade ex-dividend in the next three 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 of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. In other words, investors can purchase Gandhar Oil Refinery (India)'s shares before the 31st of July in order to be eligible for the dividend, which will be paid on the 21st of August.
The company's next dividend payment will be ₹2.00 per share. Last year, in total, the company distributed ₹2.00 to shareholders. Based on the last year's worth of payments, Gandhar Oil Refinery (India) has a trailing yield of 0.7% on the current stock price of ₹282.46. If you buy this business for its dividend, you should have an idea of whether Gandhar Oil Refinery (India)'s dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
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. Gandhar Oil Refinery (India) is paying out just 5.4% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. 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. Thankfully its dividend payments took up just 25% of the free cash flow it generated, which is a comfortable payout ratio.
It's positive to see that Gandhar Oil Refinery (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 Gandhar Oil Refinery (India)
Click here to see how much of its profit Gandhar Oil Refinery (India) 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, Gandhar Oil Refinery (India)'s earnings per share have been growing at 20% a year for the past five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last two years, Gandhar Oil Refinery (India) has lifted its dividend by approximately 100% 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.
Final Takeaway
Has Gandhar Oil Refinery (India) got what it takes to maintain its dividend payments? We love that Gandhar Oil Refinery (India) 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. There's a lot to like about Gandhar Oil Refinery (India), and we would prioritise taking a closer look at it.
On that note, you'll want to research what risks Gandhar Oil Refinery (India) is facing. Every company has risks, and we've spotted 2 warning signs for Gandhar Oil Refinery (India) you should know about.
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.