Three Days Left Until Suprajit Engineering Limited (NSE:SUPRAJIT) Trades Ex-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 Suprajit Engineering Limited (NSE:SUPRAJIT) is about to go ex-dividend in just 3 days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. 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 Suprajit Engineering's shares on or after the 1st of September, you won't be eligible to receive the dividend, when it is paid on the 12th of October.
The company's next dividend payment will be ₹2.00 per share, on the back of last year when the company paid a total of ₹3.50 to shareholders. Looking at the last 12 months of distributions, Suprajit Engineering has a trailing yield of approximately 0.7% on its current stock price of ₹504.05. If you buy this business for its dividend, you should have an idea of whether Suprajit Engineering's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
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. That's why it's good to see Suprajit Engineering paying out a modest 26% of its earnings. A useful secondary check can be to evaluate whether Suprajit Engineering generated enough free cash flow to afford its dividend. It paid out 84% 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 positive to see that Suprajit Engineering'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 Suprajit Engineering
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Suprajit Engineering, with earnings per share up 5.9% on average over the last five years. Decent historical earnings per share growth suggests Suprajit Engineering has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.
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, Suprajit Engineering has increased its dividend at approximately 14% 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.
To Sum It Up
From a dividend perspective, should investors buy or avoid Suprajit Engineering? Earnings per share have been growing at a steady rate, and Suprajit Engineering paid out less than half its profits and more than half its free cash flow as dividends over the last year. Overall, it's hard to get excited about Suprajit Engineering from a dividend perspective.
In light of that, while Suprajit Engineering has an appealing dividend, it's worth knowing the risks involved with this stock. For instance, we've identified 2 warning signs for Suprajit Engineering (1 is potentially serious) 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.