Interested In La Opala RG's (NSE:LAOPALA) Upcoming ₹5.00 Dividend? You Have Two Days Left
Readers hoping to buy La Opala RG Limited (NSE:LAOPALA) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. In other words, investors can purchase La Opala RG's shares before the 20th of August in order to be eligible for the dividend, which will be paid on the 26th of September.
The company's next dividend payment will be ₹5.00 per share, and in the last 12 months, the company paid a total of ₹5.00 per share. Calculating the last year's worth of payments shows that La Opala RG has a trailing yield of 2.6% on the current share price of ₹192.51. If you buy this business for its dividend, you should have an idea of whether La Opala RG's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are 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. La Opala RG paid out more than half (60%) of its earnings last year, which is a regular payout ratio for 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. La Opala RG paid out more free cash flow than it generated - 126%, to be precise - last year, which we think is concerningly high. It's hard to consistently pay out more cash than you generate without either borrowing or using company cash, so we'd wonder how the company justifies this payout level.
La Opala RG does have a large net cash position on the balance sheet, which could fund large dividends for a time, if the company so chose. Still, smart investors know that it is better to assess dividends relative to the cash and profit generated by the business. Paying dividends out of cash on the balance sheet is not long-term sustainable.
La Opala RG paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to La Opala RG's ability to maintain its dividend.
See our latest analysis for La Opala RG
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, La Opala RG's earnings per share have been growing at 13% a year for the past five years. Earnings have been growing at a decent rate, 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. La Opala RG has delivered 23% dividend growth per year on average over the past 10 years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
The Bottom Line
Is La Opala RG an attractive dividend stock, or better left on the shelf? It's good to see that earnings per share are growing and that the company's payout ratio is within a normal range for most businesses. However we're somewhat concerned that it paid out 126% of its cashflow, which is uncomfortably high. All things considered, we are not particularly enthused about La Opala RG from a dividend perspective.
If you want to look further into La Opala RG, it's worth knowing the risks this business faces. Every company has risks, and we've spotted 2 warning signs for La Opala RG you should know about.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.