Jubilant Life Sciences Limited (NSE:JUBILANT) stock is about to trade ex-dividend in 4 days time. If you purchase the stock on or after the 12th of September, you won't be eligible to receive this dividend, when it is paid on the 24th of October.
Jubilant Life Sciences's next dividend payment will be ₹4.50 per share, on the back of last year when the company paid a total of ₹4.50 to shareholders. Based on the last year's worth of payments, Jubilant Life Sciences has a trailing yield of 1.0% on the current stock price of ₹472.9. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are 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. Jubilant Life Sciences paid out just 13% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether Jubilant Life Sciences generated enough free cash flow to afford its dividend. Luckily it paid out just 12% of its free cash flow last year.
It's positive to see that Jubilant Life Sciences'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.
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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Jubilant Life Sciences's earnings have been skyrocketing, up 39% per annum for the past five years. Jubilant Life Sciences 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. In the past 10 years, Jubilant Life Sciences has increased its dividend at approximately 12% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
To Sum It Up
Should investors buy Jubilant Life Sciences for the upcoming dividend? We love that Jubilant Life Sciences 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. Jubilant Life Sciences looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
Wondering what the future holds for Jubilant Life Sciences? See what the ten 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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