Be Sure To Check Out Zeal Global Services Limited (NSE:ZEAL) Before It Goes 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 Zeal Global Services Limited (NSE:ZEAL) is about to go ex-dividend in just three 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 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. Meaning, you will need to purchase Zeal Global Services' shares before the 11th of September to receive the dividend, which will be paid on the 25th of October.
The company's next dividend payment will be ₹1.50 per share, and in the last 12 months, the company paid a total of ₹1.50 per share. Last year's total dividend payments show that Zeal Global Services has a trailing yield of 2.3% on the current share price of ₹65.50. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is 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. Zeal Global Services is paying out just 18% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. Zeal Global Services 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 Zeal Global Services
Click here to see how much of its profit Zeal Global Services paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Zeal Global Services has grown its earnings rapidly, up 27% a year for the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Zeal Global Services has seen its dividend decline 9.1% per annum on average over the past three years, which is not great to see. Zeal Global Services is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.
Final Takeaway
Has Zeal Global Services got what it takes to maintain its dividend payments? Companies like Zeal Global Services that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. In summary, Zeal Global Services appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
In light of that, while Zeal Global Services has an appealing dividend, it's worth knowing the risks involved with this stock. We've identified 3 warning signs with Zeal Global Services (at least 2 which are a bit unpleasant), and understanding them should be part of your investment process.
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.