Jay Shree Tea & Industries Limited (NSE:JAYSREETEA) Looks Interesting, And It's About To Pay A Dividend
Jay Shree Tea & Industries Limited (NSE:JAYSREETEA) is about to trade ex-dividend in the next three days. 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Meaning, you will need to purchase Jay Shree Tea & Industries' shares before the 5th of August to receive the dividend, which will be paid on the 11th of September.
The company's next dividend payment will be ₹0.50 per share, on the back of last year when the company paid a total of ₹0.50 to shareholders. Based on the last year's worth of payments, Jay Shree Tea & Industries has a trailing yield of 0.5% on the current stock price of ₹107.23. If you buy this business for its dividend, you should have an idea of whether Jay Shree Tea & Industries's dividend is reliable and sustainable. So we need to investigate whether Jay Shree Tea & Industries 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. Jay Shree Tea & Industries paid out just 1.8% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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. The good news is it paid out just 0.3% of its free cash flow in the last year.
It's positive to see that Jay Shree Tea & 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.
Check out our latest analysis for Jay Shree Tea & Industries
Click here to see how much of its profit Jay Shree Tea & 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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Jay Shree Tea & Industries has grown its earnings rapidly, up 49% 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, Jay Shree Tea & Industries looks like a promising growth company.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Jay Shree Tea & Industries has seen its dividend decline 6.7% per annum on average over the past 10 years, which is not great to see. Jay Shree Tea & Industries 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.
To Sum It Up
Is Jay Shree Tea & Industries an attractive dividend stock, or better left on the shelf? Jay Shree Tea & Industries has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. There's a lot to like about Jay Shree Tea & Industries, and we would prioritise taking a closer look at it.
While it's tempting to invest in Jay Shree Tea & Industries for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 4 warning signs for Jay Shree Tea & Industries that we strongly recommend you have a look at before investing in the company.
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.