One Day Left Until Asian Paints Limited (NSE:ASIANPAINT) Trades Ex-Dividend
Asian Paints Limited (NSE:ASIANPAINT) stock is about to trade ex-dividend in day or two. 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. 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. In other words, investors can purchase Asian Paints' shares before the 4th of November in order to be eligible for the dividend, which will be paid on the 28th of November.
The company's upcoming dividend is ₹5.75 a share, following on from the last 12 months, when the company distributed a total of ₹27.50 per share to shareholders. Last year's total dividend payments show that Asian Paints has a trailing yield of 1.2% on the current share price of ₹2320.00. If you buy this business for its dividend, you should have an idea of whether Asian Paints's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Asian Paints is paying out an acceptable 57% of its profit, a common payout level among most companies. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Over the last year it paid out 64% of its free cash flow as dividends, within the usual range for most companies.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
View our latest analysis for Asian Paints
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Asian Paints, with earnings per share up 9.0% on average over the last five years. Decent historical earnings per share growth suggests Asian Paints has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Asian Paints has delivered an average of 14% per year annual increase in its dividend, based on the past 10 years of dividend payments. 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
Is Asian Paints worth buying for its dividend? Earnings per share growth has been unremarkable, and while the company is paying out a majority of its earnings and cash flow in the form of dividends, the dividend payments don't appear excessive. In summary, it's hard to get excited about Asian Paints from a dividend perspective.
With that being said, if dividends aren't your biggest concern with Asian Paints, you should know about the other risks facing this business. For example, we've found 1 warning sign for Asian Paints that we recommend you consider before investing in the business.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.