Here's What We Like About Refex Industries' (NSE:REFEX) Upcoming Dividend
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 Refex Industries Limited (NSE:REFEX) is about to go ex-dividend in just three 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 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 Refex Industries' shares before the 24th of July in order to receive the dividend, which the company will pay on the 29th of August.
The company's next dividend payment will be ₹1.00 per share, on the back of last year when the company paid a total of ₹2.00 to shareholders. Looking at the last 12 months of distributions, Refex Industries has a trailing yield of approximately 0.7% on its current stock price of ₹306.80. If you buy this business for its dividend, you should have an idea of whether Refex Industries's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Refex Industries is paying out just 8.2% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. 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. What's good is that dividends were well covered by free cash flow, with the company paying out 14% of its cash flow last year.
It's positive to see that Refex 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 Refex Industries
Click here to see how much of its profit Refex 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Refex Industries has grown its earnings rapidly, up 32% a year for the past five years. Refex Industries earnings per share have been sprinting ahead like the Road Runner at a track and field day; scarcely stopping even for a cheeky "beep-beep". We also like that it is reinvesting most of its profits in its business.'
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Refex Industries has delivered 31% dividend growth per year on average over the past six years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
To Sum It Up
Is Refex Industries an attractive dividend stock, or better left on the shelf? Refex 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 six years, but the conservative payout ratio makes the current dividend look sustainable. It's a promising combination that should mark this company worthy of closer attention.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example, we've found 1 warning sign for Refex Industries that we recommend you consider before investing in the business.
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.