Why You Might Be Interested In Action Construction Equipment Limited (NSE:ACE) For Its Upcoming Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Action Construction Equipment Limited (NSE:ACE) is about to trade ex-dividend in the next three days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. In other words, investors can purchase Action Construction Equipment's shares before the 3rd of September in order to be eligible for the dividend, which will be paid on the 18th of October.
The company's next dividend payment will be ₹2.00 per share, on the back of last year when the company paid a total of ₹2.00 to shareholders. Based on the last year's worth of payments, Action Construction Equipment stock has a trailing yield of around 0.2% on the current share price of ₹1140.60. 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 Action Construction Equipment has been able to grow its dividends, or if the dividend might be cut.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Action Construction Equipment is paying out just 5.7% 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. What's good is that dividends were well covered by free cash flow, with the company paying out 7.3% of its 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 Action Construction Equipment
Click here to see how much of its profit Action Construction Equipment paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Action Construction Equipment's earnings have been skyrocketing, up 39% per annum for the past five years. Action Construction Equipment 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.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Action Construction Equipment has lifted its dividend by approximately 17% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
To Sum It Up
Should investors buy Action Construction Equipment for the upcoming dividend? It's great that Action Construction Equipment is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. Overall we think this is an attractive combination and worthy of further research.
Want to learn more about Action Construction Equipment? Here's a visualisation of its historical rate of revenue and earnings growth.
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.