Be Sure To Check Out Electrosteel Castings Limited (NSE:ELECTCAST) Before It Goes Ex-Dividend
Electrosteel Castings Limited (NSE:ELECTCAST) is about to trade ex-dividend in the next three days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. 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. Thus, you can purchase Electrosteel Castings' shares before the 14th of August in order to receive the dividend, which the company will pay on the 30th of September.
The company's upcoming dividend is ₹0.90 a share, following on from the last 12 months, when the company distributed a total of ₹0.90 per share to shareholders. Looking at the last 12 months of distributions, Electrosteel Castings has a trailing yield of approximately 1.2% on its current stock price of ₹71.98. 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 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. That's why it's good to see Electrosteel Castings paying out a modest 34% of its earnings. 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. The good news is it paid out just 8.5% of its free cash flow in the last year.
It's positive to see that Electrosteel Castings'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.
View our latest analysis for Electrosteel Castings
Click here to see how much of its profit Electrosteel Castings 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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see Electrosteel Castings's earnings per share have risen 11% per annum over the last five years. Earnings per share are growing rapidly and the company is keeping more than half of its earnings within the business; an attractive combination which could suggest the company is focused on reinvesting to grow earnings further. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Electrosteel Castings has lifted its dividend by approximately 3.3% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Electrosteel Castings is keeping back more of its profits to grow the business.
Final Takeaway
From a dividend perspective, should investors buy or avoid Electrosteel Castings? It's great that Electrosteel Castings is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. It's a promising combination that should mark this company worthy of closer attention.
So while Electrosteel Castings looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example - Electrosteel Castings has 3 warning signs we think you should be aware of.
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.