One Day Left To Buy Sona BLW Precision Forgings Limited (NSE:SONACOMS) Before The Ex-Dividend Date
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Sona BLW Precision Forgings Limited (NSE:SONACOMS) is about to go ex-dividend in just couple of days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a 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. In other words, investors can purchase Sona BLW Precision Forgings' shares before the 25th of June in order to be eligible for the dividend, which will be paid on the .
The company's next dividend payment will be ₹1.80 per share, on the back of last year when the company paid a total of ₹3.60 to shareholders. Calculating the last year's worth of payments shows that Sona BLW Precision Forgings has a trailing yield of 0.6% on the current share price of ₹621.00. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
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. Sona BLW Precision Forgings paid out a comfortable 33% of its profit last year. 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. Sona BLW Precision Forgings paid out more free cash flow than it generated - 119%, to be precise - last year, which we think is concerningly high. We're curious about why the company paid out more cash than it generated last year, since this can be one of the early signs that a dividend may be unsustainable.
Sona BLW Precision Forgings paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Cash is king, as they say, and were Sona BLW Precision Forgings to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.
See our latest analysis for Sona BLW Precision Forgings
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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 Sona BLW Precision Forgings has grown its earnings rapidly, up 22% a year for the past five years. Earnings have been growing quickly, but we're concerned dividend payments consumed most of the company's cash flow over the past year.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past four years, Sona BLW Precision Forgings has increased its dividend at approximately 24% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
To Sum It Up
Is Sona BLW Precision Forgings an attractive dividend stock, or better left on the shelf? We're glad to see the company has been improving its earnings per share while also paying out a low percentage of income. However, it's not great to see it paying out what we see as an uncomfortably high percentage of its cash flow. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.
So while Sona BLW Precision Forgings looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. In terms of investment risks, we've identified 1 warning sign with Sona BLW Precision Forgings and understanding them should be part of your investment process.
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.