United Drilling Tools Limited (NSE:UNIDT) Goes Ex-Dividend Soon
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 United Drilling Tools Limited (NSE:UNIDT) 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 of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. This means that investors who purchase United Drilling Tools' shares on or after the 16th of September will not receive the dividend, which will be paid on the 8th of October.
The company's next dividend payment will be ₹0.60 per share, on the back of last year when the company paid a total of ₹1.80 to shareholders. Looking at the last 12 months of distributions, United Drilling Tools has a trailing yield of approximately 0.8% on its current stock price of ₹230.95. If you buy this business for its dividend, you should have an idea of whether United Drilling Tools's dividend is reliable and sustainable. 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. United Drilling Tools has a low and conservative payout ratio of just 12% of its income after tax. A useful secondary check can be to evaluate whether United Drilling Tools generated enough free cash flow to afford its dividend. The good news is it paid out just 10% of its free cash flow in the last year.
It's positive to see that United Drilling Tools'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.
See our latest analysis for United Drilling Tools
Click here to see how much of its profit United Drilling Tools paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. United Drilling Tools's earnings per share have fallen at approximately 9.1% a year over the previous five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. United Drilling Tools has delivered 13% dividend growth per year on average over the past nine years.
To Sum It Up
Has United Drilling Tools got what it takes to maintain its dividend payments? United Drilling Tools has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. Overall, it's hard to get excited about United Drilling Tools from a dividend perspective.
While it's tempting to invest in United Drilling Tools for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 3 warning signs for United Drilling Tools that we strongly recommend you have a look at before investing in the company.
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.