Be Sure To Check Out Bannari Amman Sugars Limited (NSE:BANARISUG) Before It Goes Ex-Dividend
Readers hoping to buy Bannari Amman Sugars Limited (NSE:BANARISUG) 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Meaning, you will need to purchase Bannari Amman Sugars' shares before the 16th of September to receive the dividend, which will be paid on the 23rd of October.
The company's next dividend payment will be ₹12.50 per share, on the back of last year when the company paid a total of ₹12.50 to shareholders. Based on the last year's worth of payments, Bannari Amman Sugars stock has a trailing yield of around 0.4% on the current share price of ₹3517.60. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Bannari Amman Sugars has a low and conservative payout ratio of just 11% of its income after tax. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out 3.9% of its free cash flow as dividends last year, which is conservatively low.
It's positive to see that Bannari Amman Sugars'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 Bannari Amman Sugars
Click here to see how much of its profit Bannari Amman Sugars 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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see Bannari Amman Sugars earnings per share are up 5.7% per annum over the last five years. Earnings per share have been increasing steadily and management is reinvesting almost all of the profits back into the business. If profits are reinvested effectively, this could be a bullish combination for future earnings and dividends.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Bannari Amman Sugars has delivered 17% dividend growth per year on average over the past 10 years. 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.
Final Takeaway
From a dividend perspective, should investors buy or avoid Bannari Amman Sugars? Earnings per share have been growing moderately, and Bannari Amman Sugars is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. It might be nice to see earnings growing faster, but Bannari Amman Sugars is being conservative with its dividend payouts and could still perform reasonably over the long run. There's a lot to like about Bannari Amman Sugars, and we would prioritise taking a closer look at it.
While it's tempting to invest in Bannari Amman Sugars for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 1 warning sign for Bannari Amman Sugars you should know about.
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.