Here's What We Like About Atul Auto's (NSE:ATULAUTO) Upcoming Dividend
It looks like Atul Auto Limited (NSE:ATULAUTO) is about to go ex-dividend in the next three days. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. 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. Thus, you can purchase Atul Auto's shares before the 11th of September in order to receive the dividend, which the company will pay on the 18th of October.
The company's next dividend payment will be ₹3.00 per share. Last year, in total, the company distributed ₹3.00 to shareholders. Based on the last year's worth of payments, Atul Auto stock has a trailing yield of around 0.6% on the current share price of ₹465.15. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Atul Auto can afford its dividend, and if the dividend could grow.
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. Atul Auto has a low and conservative payout ratio of just 20% of its income after tax.
View our latest analysis for Atul Auto
Click here to see how much of its profit Atul Auto paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Atul Auto has grown its earnings rapidly, up 70% a year for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, Atul Auto looks like a promising growth company.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Atul Auto has seen its dividend decline 5.4% per annum on average over the past 10 years, which is not great to see. Atul Auto is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.
The Bottom Line
Is Atul Auto worth buying for its dividend? Companies like Atul Auto that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. Atul Auto ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. In terms of investment risks, we've identified 1 warning sign with Atul Auto and understanding them should be part of your investment process.
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.