Ecos (India) Mobility & Hospitality (NSE:ECOSMOBLTY) Could Be A Buy For Its Upcoming Dividend
Ecos (India) Mobility & Hospitality Limited (NSE:ECOSMOBLTY) is about to trade ex-dividend in the next three days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important as the process of settlement involves at least 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 Ecos (India) Mobility & Hospitality's shares before the 18th of August in order to be eligible for the dividend, which will be paid on the 21st of October.
The company's next dividend payment will be ₹2.38 per share. Last year, in total, the company distributed ₹2.38 to shareholders. Calculating the last year's worth of payments shows that Ecos (India) Mobility & Hospitality has a trailing yield of 2.0% on the current share price of ₹119.48. If you buy this business for its dividend, you should have an idea of whether Ecos (India) Mobility & Hospitality's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
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. Ecos (India) Mobility & Hospitality paid out just 25% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether Ecos (India) Mobility & Hospitality generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 43% of the free cash flow it generated, which is a comfortable payout ratio.
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 Ecos (India) Mobility & Hospitality
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see Ecos (India) Mobility & Hospitality's earnings have been skyrocketing, up 81% per annum for the past five years. Ecos (India) Mobility & Hospitality is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.
Unfortunately Ecos (India) Mobility & Hospitality has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.
To Sum It Up
Has Ecos (India) Mobility & Hospitality got what it takes to maintain its dividend payments? We love that Ecos (India) Mobility & Hospitality is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. It's a promising combination that should mark this company worthy of closer attention.
In light of that, while Ecos (India) Mobility & Hospitality has an appealing dividend, it's worth knowing the risks involved with this stock. Case in point: We've spotted 1 warning sign for Ecos (India) Mobility & Hospitality you should be aware of.
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.