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 Bright Solar Limited (NSE:BRIGHT) is about to go ex-dividend in just 3 days. This means that investors who purchase shares on or after the 12th of September will not receive the dividend, which will be paid on the 28th of October.
Bright Solar's next dividend payment will be ₹0.10 per share, and in the last 12 months, the company paid a total of ₹0.10 per share. Last year's total dividend payments show that Bright Solar has a trailing yield of 1.2% on the current share price of ₹8.45. If you buy this business for its dividend, you should have an idea of whether Bright Solar's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's 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. Bright Solar is paying out just 8.1% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.
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. 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 Bright Solar's earnings have been skyrocketing, up 25% per annum for the past five years.
Unfortunately Bright Solar 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
Has Bright Solar got what it takes to maintain its dividend payments? Bright Solar has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. Overall we think this is an attractive combination and worthy of further research.
Curious about whether Bright Solar has been able to consistently generate growth? Here's a chart of its historical revenue and earnings growth.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
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If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.