Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see IndoStar Capital Finance Limited (NSE:INDOSTAR) is about to trade ex-dividend in the next 3 days. Investors can purchase shares before the 19th of November in order to be eligible for this dividend, which will be paid on the 6th of December.
IndoStar Capital Finance's upcoming dividend is ₹1.00 a share, following on from the last 12 months, when the company distributed a total of ₹2.00 per share to shareholders. Based on the last year's worth of payments, IndoStar Capital Finance stock has a trailing yield of around 1.1% on the current share price of ₹180.8. If you buy this business for its dividend, you should have an idea of whether IndoStar Capital Finance's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
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. IndoStar Capital Finance paid out just 7.6% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
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. If earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see IndoStar Capital Finance earnings per share are up 9.9% per annum over the last five years.
Given that IndoStar Capital Finance has only been paying a dividend for a year, there's not much of a past history to draw insight from.
To Sum It Up
Is IndoStar Capital Finance an attractive dividend stock, or better left on the shelf? It has been growing its earnings per share somewhat in recent years, although it reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. We think this is a pretty attractive combination, and would be interested in investigating IndoStar Capital Finance more closely.
Ever wonder what the future holds for IndoStar Capital Finance? See what the four analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
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.
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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.