Three Days Left To Buy Gulf Oil Lubricants India Limited (NSE:GULFOILLUB) Before The Ex-Dividend Date

Gulf Oil Lubricants India Limited (NSE:GULFOILLUB) stock is about to trade ex-dividend in three days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. In other words, investors can purchase Gulf Oil Lubricants India's shares before the 5th of September in order to be eligible for the dividend, which will be paid on the 12th 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 ₹40.00 per share. Calculating the last year's worth of payments shows that Gulf Oil Lubricants India has a trailing yield of 2.8% on the current share price of ₹1415.70. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Gulf Oil Lubricants India has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Gulf Oil Lubricants India

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. Gulf Oil Lubricants India paid out 57% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Over the last year it paid out 64% of its free cash flow as dividends, within the usual range for most companies.

It's positive to see that Gulf Oil Lubricants India'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.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

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. For this reason, we're glad to see Gulf Oil Lubricants India's earnings per share have risen 13% per annum over the last five years. Gulf Oil Lubricants India has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. This is a reasonable combination that could hint at some further dividend increases in the future.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Gulf Oil Lubricants India has delivered 26% dividend growth per year on average over the past 10 years. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

The Bottom Line

From a dividend perspective, should investors buy or avoid Gulf Oil Lubricants India? Higher earnings per share generally lead to higher dividends from dividend-paying stocks over the long run. However, we'd also note that Gulf Oil Lubricants India is paying out more than half of its earnings and cash flow as profits, which could limit the dividend growth if earnings growth slows. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Gulf Oil Lubricants India's dividend merits.

So while Gulf Oil Lubricants India looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example - Gulf Oil Lubricants India has 1 warning sign we think you should be aware of.

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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.