Shiva Texyarn Limited (NSE:SHIVATEX) Stock Goes Ex-Dividend In Just Two Days
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Shiva Texyarn Limited (NSE:SHIVATEX) is about to trade ex-dividend in the next two 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase Shiva Texyarn's shares before the 20th of August in order to receive the dividend, which the company will pay on the 26th of September.
The company's next dividend payment will be ₹0.60 per share, on the back of last year when the company paid a total of ₹0.60 to shareholders. Based on the last year's worth of payments, Shiva Texyarn stock has a trailing yield of around 0.4% on the current share price of ₹162.68. If you buy this business for its dividend, you should have an idea of whether Shiva Texyarn's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Shiva Texyarn is paying out just 7.6% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. 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 1.7% of its free cash flow in the 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.
Check out our latest analysis for Shiva Texyarn
Click here to see how much of its profit Shiva Texyarn paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. So we're not too excited that Shiva Texyarn's earnings are down 4.8% a year over the past five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Shiva Texyarn has seen its dividend decline 12% per annum on average over the past eight years, which is not great to see. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.
The Bottom Line
From a dividend perspective, should investors buy or avoid Shiva Texyarn? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Shiva Texyarn's dividend merits.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Be aware that Shiva Texyarn is showing 5 warning signs in our investment analysis, and 2 of those are significant...
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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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.