Three Days Left To Buy Godfrey Phillips India Limited (NSE:GODFRYPHLP) Before The Ex-Dividend Date
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Godfrey Phillips India Limited (NSE:GODFRYPHLP) is about to trade ex-dividend in the next 3 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 because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, Godfrey Phillips India investors that purchase the stock on or after the 11th of August will not receive the dividend, which will be paid on the 23rd of September.
The company's upcoming dividend is ₹33.00 a share, following on from the last 12 months, when the company distributed a total of ₹50.00 per share to shareholders. Last year's total dividend payments show that Godfrey Phillips India has a trailing yield of 2.2% on the current share price of ₹2290.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Godfrey Phillips India is paying out an acceptable 51% of its profit, a common payout level among most companies. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It paid out an unsustainably high 279% of its free cash flow as dividends over the past 12 months, which is worrying. Our definition of free cash flow excludes cash generated from asset sales, so since Godfrey Phillips India is paying out such a high percentage of its cash flow, it might be worth seeing if it sold assets or had similar events that might have led to such a high dividend payment.
While Godfrey Phillips India's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Were this to happen repeatedly, this would be a risk to Godfrey Phillips India's ability to maintain its dividend.
See our latest analysis for Godfrey Phillips India
Click here to see how much of its profit Godfrey Phillips 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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see Godfrey Phillips India's earnings have been skyrocketing, up 29% per annum for the past five years. Earnings have been growing quickly, but we're concerned dividend payments consumed most of the company's cash flow over the past year.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Godfrey Phillips India has lifted its dividend by approximately 34% 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 Godfrey Phillips India for the upcoming dividend? Earnings per share growth is a positive, and the company's payout ratio looks normal. However, we note Godfrey Phillips India paid out a much higher percentage of its free cash flow, which makes us uncomfortable. All things considered, we are not particularly enthused about Godfrey Phillips India from a dividend perspective.
However if you're still interested in Godfrey Phillips India as a potential investment, you should definitely consider some of the risks involved with Godfrey Phillips India. Every company has risks, and we've spotted 1 warning sign for Godfrey Phillips India you should know about.
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.