Why You Might Be Interested In Jay Bharat Maruti Limited (NSE:JAYBARMARU) For Its 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 Jay Bharat Maruti Limited (NSE:JAYBARMARU) 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. 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. Thus, you can purchase Jay Bharat Maruti's shares before the 19th of August in order to receive the dividend, which the company will pay on the 25th of September.
The company's next dividend payment will be ₹0.70 per share, and in the last 12 months, the company paid a total of ₹0.70 per share. Looking at the last 12 months of distributions, Jay Bharat Maruti has a trailing yield of approximately 0.5% on its current stock price of ₹127.86. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Jay Bharat Maruti 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. Jay Bharat Maruti is paying out just 5.4% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. A useful secondary check can be to evaluate whether Jay Bharat Maruti generated enough free cash flow to afford its dividend. Luckily it paid out just 16% of its free cash flow last year.
It's positive to see that Jay Bharat Maruti'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.
View our latest analysis for Jay Bharat Maruti
Click here to see how much of its profit Jay Bharat Maruti paid out over the last 12 months.
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 Jay Bharat Maruti's earnings have been skyrocketing, up 39% per annum for the past five years. Jay Bharat Maruti looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Jay Bharat Maruti has increased its dividend at approximately 5.8% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Jay Bharat Maruti is keeping back more of its profits to grow the business.
Final Takeaway
Should investors buy Jay Bharat Maruti for the upcoming dividend? Jay Bharat Maruti 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. Jay Bharat Maruti looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
So while Jay Bharat Maruti looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Be aware that Jay Bharat Maruti is showing 3 warning signs in our investment analysis, and 1 of those can't be ignored...
If you're in the market for strong dividend payers, we recommend checking our selection of top 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.