Read This Before Considering Tribhovandas Bhimji Zaveri Limited (NSE:TBZ) For Its Upcoming ₹2.50 Dividend
It looks like Tribhovandas Bhimji Zaveri Limited (NSE:TBZ) is about to go ex-dividend in the next 3 days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible 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. Accordingly, Tribhovandas Bhimji Zaveri investors that purchase the stock on or after the 2nd of September will not receive the dividend, which will be paid on the 9th of October.
The company's next dividend payment will be ₹2.50 per share. Last year, in total, the company distributed ₹2.50 to shareholders. Based on the last year's worth of payments, Tribhovandas Bhimji Zaveri stock has a trailing yield of around 0.8% on the current share price of ₹301.70. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is 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. Tribhovandas Bhimji Zaveri is paying out just 8.2% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. 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. The company paid out 96% of its free cash flow over the last year, which we think is outside the ideal range for most businesses. Cash flows are usually much more volatile than earnings, so this could be a temporary effect - but we'd generally want to look more closely here.
While Tribhovandas Bhimji Zaveri's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Were this to happen repeatedly, this would be a risk to Tribhovandas Bhimji Zaveri's ability to maintain its dividend.
Check out our latest analysis for Tribhovandas Bhimji Zaveri
Click here to see how much of its profit Tribhovandas Bhimji Zaveri paid out over the last 12 months.
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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Tribhovandas Bhimji Zaveri has grown its earnings rapidly, up 38% a year for the past five years. Earnings have been growing quickly, but we're concerned dividend payments consumed most of the company's cash flow over the past year.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Tribhovandas Bhimji Zaveri has lifted its dividend by approximately 9.6% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
The Bottom Line
Is Tribhovandas Bhimji Zaveri worth buying for its dividend? We like that Tribhovandas Bhimji Zaveri has been successfully growing its earnings per share at a nice rate and reinvesting most of its profits in the business. However, we note the high cashflow payout ratio with some concern. In summary, while it has some positive characteristics, we're not inclined to race out and buy Tribhovandas Bhimji Zaveri today.
On that note, you'll want to research what risks Tribhovandas Bhimji Zaveri is facing. For example, we've found 3 warning signs for Tribhovandas Bhimji Zaveri (2 are a bit unpleasant!) that deserve your attention before investing in the shares.
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.