Why You Might Be Interested In Kovai Medical Center and Hospital Limited (NSE:KOVAI) For Its Upcoming Dividend
Readers hoping to buy Kovai Medical Center and Hospital Limited (NSE:KOVAI) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a 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. This means that investors who purchase Kovai Medical Center and Hospital's shares on or after the 19th of August will not receive the dividend, which will be paid on the 25th of September.
The company's upcoming dividend is ₹15.00 a share, following on from the last 12 months, when the company distributed a total of ₹15.00 per share to shareholders. Calculating the last year's worth of payments shows that Kovai Medical Center and Hospital has a trailing yield of 0.2% on the current share price of ₹6038.50. 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 Kovai Medical Center and Hospital has been able to grow its dividends, or if the dividend might be cut.
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. Kovai Medical Center and Hospital is paying out just 6.7% 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. The good news is it paid out just 9.9% of its free cash flow in the last year.
It's positive to see that Kovai Medical Center and Hospital'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 Kovai Medical Center and Hospital
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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Kovai Medical Center and Hospital has grown its earnings rapidly, up 27% a year for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, Kovai Medical Center and Hospital looks like a promising growth company.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Kovai Medical Center and Hospital has delivered an average of 26% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
The Bottom Line
Should investors buy Kovai Medical Center and Hospital for the upcoming dividend? Kovai Medical Center and Hospital has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. Kovai Medical Center and Hospital looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
Keen to explore more data on Kovai Medical Center and Hospital's financial performance? Check out our visualisation of its historical revenue and earnings growth.
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.