Income Investors Should Know That Jayant Agro-Organics Limited (NSE:JAYAGROGN) Goes Ex-Dividend Soon
Jayant Agro-Organics Limited (NSE:JAYAGROGN) is about to trade ex-dividend in the next two 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. Accordingly, Jayant Agro-Organics investors that purchase the stock on or after the 7th of August will not receive the dividend, which will be paid on the 12th of October.
The company's next dividend payment will be ₹3.50 per share, on the back of last year when the company paid a total of ₹3.50 to shareholders. Looking at the last 12 months of distributions, Jayant Agro-Organics has a trailing yield of approximately 1.5% on its current stock price of ₹230.95. 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! We need to see whether the dividend is covered by earnings and if it's 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. Jayant Agro-Organics is paying out just 21% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. 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. It paid out 80% 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.
View our latest analysis for Jayant Agro-Organics
Click here to see how much of its profit Jayant Agro-Organics 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. With that in mind, we're encouraged by the steady growth at Jayant Agro-Organics, with earnings per share up 2.5% on average over the last five years. A payout ratio of 21% looks like a tacit signal from management that reinvestment opportunities in the business are low. In line with limited earnings growth in recent years, this is not the most appealing combination.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Jayant Agro-Organics has lifted its dividend by approximately 11% 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
Has Jayant Agro-Organics got what it takes to maintain its dividend payments? Earnings per share have been growing at a steady rate, and Jayant Agro-Organics paid out less than half its profits and more than half its free cash flow as dividends over the last year. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.
In light of that, while Jayant Agro-Organics has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 3 warning signs for Jayant Agro-Organics 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.