Just Three Days Till Stove Kraft Limited (NSE:STOVEKRAFT) Will Be Trading Ex-Dividend
Readers hoping to buy Stove Kraft Limited (NSE:STOVEKRAFT) 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. 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. Therefore, if you purchase Stove Kraft's shares on or after the 4th of September, you won't be eligible to receive the dividend, when it is paid on the 11th of October.
The company's next dividend payment will be ₹3.50 per share, and in the last 12 months, the company paid a total of ₹3.50 per share. Looking at the last 12 months of distributions, Stove Kraft has a trailing yield of approximately 0.4% on its current stock price of ₹797.50. 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! So we need to investigate whether Stove Kraft can afford its dividend, and if the dividend could grow.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Stove Kraft paid out a comfortable 28% of its profit last year. A useful secondary check can be to evaluate whether Stove Kraft generated enough free cash flow to afford its dividend. It paid out 6.8% of its free cash flow as dividends last year, which is conservatively low.
It's positive to see that Stove Kraft'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 Stove Kraft
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Stove Kraft's earnings per share have fallen at approximately 11% a year over the previous five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Stove Kraft has delivered 18% dividend growth per year on average over the past two years.
Final Takeaway
Should investors buy Stove Kraft for the upcoming dividend? Stove Kraft has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.
Ever wonder what the future holds for Stove Kraft? See what the four analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
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.