Be Sure To Check Out Sharda Motor Industries Limited (NSE:SHARDAMOTR) Before It Goes Ex-Dividend
Sharda Motor Industries Limited (NSE:SHARDAMOTR) is about to trade ex-dividend in the next 3 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 important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Thus, you can purchase Sharda Motor Industries' shares before the 18th of September in order to receive the dividend, which the company will pay on the 24th of October.
The company's next dividend payment will be ₹20.00 per share, and in the last 12 months, the company paid a total of ₹20.00 per share. Last year's total dividend payments show that Sharda Motor Industries has a trailing yield of 2.1% on the current share price of ₹943.75. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Sharda Motor Industries has been able to grow its dividends, or if the dividend might be cut.
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. That's why it's good to see Sharda Motor Industries paying out a modest 33% of its earnings. 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. Thankfully its dividend payments took up just 34% of the free cash flow it generated, which is a comfortable payout ratio.
It's positive to see that Sharda Motor Industries'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 Sharda Motor Industries
Click here to see how much of its profit Sharda Motor Industries 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 earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Sharda Motor Industries's earnings have been skyrocketing, up 39% per annum for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Sharda Motor Industries has lifted its dividend by approximately 32% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
The Bottom Line
From a dividend perspective, should investors buy or avoid Sharda Motor Industries? It's great that Sharda Motor Industries 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. Sharda Motor Industries looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
While it's tempting to invest in Sharda Motor Industries for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 1 warning sign for Sharda Motor Industries and you should be aware of this before buying any 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.