Why You Might Be Interested In Jindal Drilling & Industries Limited (NSE:JINDRILL) 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 Jindal Drilling & Industries Limited (NSE:JINDRILL) 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase Jindal Drilling & Industries' shares on or after the 1st of September, you won't be eligible to receive the dividend, when it is paid on the 15th of October.
The company's upcoming dividend is ₹1.00 a share, following on from the last 12 months, when the company distributed a total of ₹1.00 per share to shareholders. Based on the last year's worth of payments, Jindal Drilling & Industries has a trailing yield of 0.2% on the current stock price of ₹630.55. 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! So we need to investigate whether Jindal Drilling & Industries can afford its dividend, and if the dividend could grow.
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. Jindal Drilling & Industries is paying out just 1.4% 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 Jindal Drilling & Industries generated enough free cash flow to afford its dividend. It paid out 2.3% of its free cash flow as dividends last year, which is conservatively low.
It's positive to see that Jindal Drilling & 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.
View our latest analysis for Jindal Drilling & Industries
Click here to see how much of its profit Jindal Drilling & Industries paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see Jindal Drilling & Industries's earnings have been skyrocketing, up 33% per annum for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, Jindal Drilling & Industries looks like a promising growth company.
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, Jindal Drilling & Industries has increased its dividend at approximately 7.2% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
The Bottom Line
From a dividend perspective, should investors buy or avoid Jindal Drilling & Industries? Jindal Drilling & Industries has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. It's a promising combination that should mark this company worthy of closer attention.
Want to learn more about Jindal Drilling & Industries? Here's a visualisation of its historical rate of revenue and earnings growth.
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.