Shankar Lal Rampal Dye-Chem Limited (NSE:SRD) Pays A ₹0.05 Dividend In Just Three Days
Readers hoping to buy Shankar Lal Rampal Dye-Chem Limited (NSE:SRD) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Accordingly, Shankar Lal Rampal Dye-Chem investors that purchase the stock on or after the 11th of September will not receive the dividend, which will be paid on the 19th of October.
The company's upcoming dividend is ₹0.05 a share, following on from the last 12 months, when the company distributed a total of ₹0.05 per share to shareholders. Calculating the last year's worth of payments shows that Shankar Lal Rampal Dye-Chem has a trailing yield of 0.1% on the current share price of ₹39.33. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Shankar Lal Rampal Dye-Chem is paying out just 2.4% 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 Shankar Lal Rampal Dye-Chem generated enough free cash flow to afford its dividend. Shankar Lal Rampal Dye-Chem paid a dividend despite reporting negative free cash flow over the last twelve months. This may be due to heavy investment in the business, but this is still suboptimal from a dividend sustainability perspective.
Check out our latest analysis for Shankar Lal Rampal Dye-Chem
Click here to see how much of its profit Shankar Lal Rampal Dye-Chem 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. For this reason, we're glad to see Shankar Lal Rampal Dye-Chem's earnings per share have risen 19% per annum over the last five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last seven years, Shankar Lal Rampal Dye-Chem has lifted its dividend by approximately 6.9% 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
Should investors buy Shankar Lal Rampal Dye-Chem for the upcoming dividend? We like that Shankar Lal Rampal Dye-Chem has been successfully growing its earnings per share at a nice rate and reinvesting most of its profits in the business. However, we note the high cashflow payout ratio with some concern. Overall, it's hard to get excited about Shankar Lal Rampal Dye-Chem from a dividend perspective.
So while Shankar Lal Rampal Dye-Chem looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Be aware that Shankar Lal Rampal Dye-Chem is showing 2 warning signs in our investment analysis, and 1 of those is concerning...
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.