Should You Buy Ganesh Consumer Products Limited (NSE:GANESHCP) For Its Upcoming Dividend?
It looks like Ganesh Consumer Products Limited (NSE:GANESHCP) is about to go ex-dividend in the next three days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. Thus, you can purchase Ganesh Consumer Products' shares before the 9th of November in order to receive the dividend, which the company will pay on the 30th of November.
The company's upcoming dividend is ₹3.70 a share, following on from the last 12 months, when the company distributed a total of ₹5.00 per share to shareholders. Based on the last year's worth of payments, Ganesh Consumer Products stock has a trailing yield of around 2.6% on the current share price of ₹192.36. 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! As a result, readers should always check whether Ganesh Consumer Products has been able to grow its dividends, or if the dividend might be cut.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Ganesh Consumer Products paid out a comfortable 38% of its profit last year. 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 19% of its free cash flow as dividends last year, which is conservatively low.
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.
Check out our latest analysis for Ganesh Consumer Products
Click here to see how much of its profit Ganesh Consumer Products 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. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Ganesh Consumer Products's earnings per share have been growing at 12% a year for the past five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.
Unfortunately Ganesh Consumer Products has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.
The Bottom Line
Is Ganesh Consumer Products worth buying for its dividend? We love that Ganesh Consumer Products is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. Overall we think this is an attractive combination and worthy of further research.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example - Ganesh Consumer Products has 1 warning sign we think you should be aware of.
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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