IRB Infrastructure Developers Limited (NSE:IRB) Looks Like A Good Stock, And It's Going 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 IRB Infrastructure Developers Limited (NSE:IRB) is about to go ex-dividend in just 3 days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Meaning, you will need to purchase IRB Infrastructure Developers' shares before the 12th of November to receive the dividend, which will be paid on the 4th of December.
The company's next dividend payment will be ₹0.05 per share. Last year, in total, the company distributed ₹0.20 to shareholders. Based on the last year's worth of payments, IRB Infrastructure Developers has a trailing yield of 1.2% on the current stock price of ₹17.02. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether IRB Infrastructure Developers 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. IRB Infrastructure Developers has a low and conservative payout ratio of just 9.5% of its income after tax. 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. What's good is that dividends were well covered by free cash flow, with the company paying out 10% of its cash flow last year.
It's positive to see that IRB Infrastructure Developers'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 IRB Infrastructure Developers
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see IRB Infrastructure Developers's earnings have been skyrocketing, up 40% per annum for the past five years. IRB Infrastructure Developers earnings per share have been sprinting ahead like the Road Runner at a track and field day; scarcely stopping even for a cheeky "beep-beep". We also like that it is reinvesting most of its profits in its business.'
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. IRB Infrastructure Developers's dividend payments are effectively flat on where they were 10 years ago.
To Sum It Up
Is IRB Infrastructure Developers an attractive dividend stock, or better left on the shelf? IRB Infrastructure Developers has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. 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. Be aware that IRB Infrastructure Developers is showing 4 warning signs in our investment analysis, and 1 of those is a bit concerning...
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
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