Read This Before Considering Alembic Pharmaceuticals Limited (NSE:APLLTD) For Its Upcoming ₹12.00 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 Alembic Pharmaceuticals Limited (NSE:APLLTD) is about to go ex-dividend in just three days. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. In other words, investors can purchase Alembic Pharmaceuticals' shares before the 29th of July in order to be eligible for the dividend, which will be paid on the 4th of September.
The company's next dividend payment will be ₹12.00 per share, and in the last 12 months, the company paid a total of ₹12.00 per share. Calculating the last year's worth of payments shows that Alembic Pharmaceuticals has a trailing yield of 1.5% on the current share price of ₹797.60. If you buy this business for its dividend, you should have an idea of whether Alembic Pharmaceuticals's dividend is reliable and sustainable. So we need to investigate whether Alembic Pharmaceuticals can afford its dividend, and if the dividend could grow.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Alembic Pharmaceuticals paid out a comfortable 35% of its profit last year. 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. It paid out 75% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
See our latest analysis for Alembic Pharmaceuticals
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. Alembic Pharmaceuticals's earnings per share have fallen at approximately 10% a year over the previous five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Alembic Pharmaceuticals has increased its dividend at approximately 12% a year on average.
The Bottom Line
From a dividend perspective, should investors buy or avoid Alembic Pharmaceuticals? Its earnings per share have been declining meaningfully, although it is paying out less than half its income and more than half its cash flow as dividends. Neither payout ratio appears an immediate concern, but we're concerned about the earnings. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Alembic Pharmaceuticals's dividend merits.
So if you want to do more digging on Alembic Pharmaceuticals, you'll find it worthwhile knowing the risks that this stock faces. Case in point: We've spotted 1 warning sign for Alembic Pharmaceuticals you should be aware of.
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.