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Should Income Investors Look At Aro Granite Industries Limited (NSE:AROGRANITE) Before Its Ex-Dividend?

Simply Wall St

Readers hoping to buy Aro Granite Industries Limited (NSE:AROGRANITE) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Investors can purchase shares before the 23rd of August in order to be eligible for this dividend, which will be paid on the 30th of September.

Aro Granite Industries's next dividend payment will be ₹1.00 per share, on the back of last year when the company paid a total of ₹1.00 to shareholders. Last year's total dividend payments show that Aro Granite Industries has a trailing yield of 2.8% on the current share price of ₹36.75. If you buy this business for its dividend, you should have an idea of whether Aro Granite Industries's dividend is reliable and sustainable. As a result, readers should always check whether Aro Granite Industries has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Aro Granite Industries

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Aro Granite Industries has a low and conservative payout ratio of just 15% of its income after tax. Aro Granite Industries paid a dividend despite reporting negative free cash flow over the last twelve months. This may be due to heavy investment in the business, but this is still suboptimal from a dividend sustainability perspective.

Click here to see how much of its profit Aro Granite Industries paid out over the last 12 months.

NSEI:AROGRANITE Historical Dividend Yield, August 20th 2019

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Readers will understand then, why we're concerned to see Aro Granite Industries's earnings per share have dropped 18% a year over the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Aro Granite Industries has delivered 4.1% dividend growth per year on average over the past 10 years.

The Bottom Line

Is Aro Granite Industries an attractive dividend stock, or better left on the shelf? Aro Granite Industries has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. In summary, while it has some positive characteristics, we're not inclined to race out and buy Aro Granite Industries today.

Want to learn more about Aro Granite Industries's dividend performance? Check out this visualisation of its historical revenue and earnings growth.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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.