Here's What We Like About Sarda Energy & Minerals' (NSE:SARDAEN) Upcoming Dividend
Sarda Energy & Minerals Limited (NSE:SARDAEN) stock is about to trade ex-dividend in 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Thus, you can purchase Sarda Energy & Minerals' shares before the 14th of August in order to receive the dividend, which the company will pay on the .
The company's next dividend payment will be ₹2.00 per share, and in the last 12 months, the company paid a total of ₹2.00 per share. Based on the last year's worth of payments, Sarda Energy & Minerals has a trailing yield of 0.4% on the current stock price of ₹497.60. 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! As a result, readers should always check whether Sarda Energy & Minerals has been able to grow its dividends, or if the dividend might be cut.
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. Sarda Energy & Minerals has a low and conservative payout ratio of just 6.4% of its income after tax. 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. Luckily it paid out just 3.8% of its free 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.
View our latest analysis for Sarda Energy & Minerals
Click here to see how much of its profit Sarda Energy & Minerals paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Sarda Energy & Minerals has grown its earnings rapidly, up 25% a year for the past five years. Sarda Energy & Minerals 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.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Sarda Energy & Minerals has delivered an average of 17% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
The Bottom Line
Has Sarda Energy & Minerals got what it takes to maintain its dividend payments? Sarda Energy & Minerals has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. It's a promising combination that should mark this company worthy of closer attention.
While it's tempting to invest in Sarda Energy & Minerals for the dividends alone, you should always be mindful of the risks involved. Case in point: We've spotted 1 warning sign for Sarda Energy & Minerals 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.