Readers hoping to buy CRISIL Limited (NSE:CRISIL) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. You can purchase shares before the 21st of November in order to receive the dividend, which the company will pay on the 29th of November.
CRISIL's next dividend payment will be ₹7.00 per share, and in the last 12 months, the company paid a total of ₹30.00 per share. Calculating the last year's worth of payments shows that CRISIL has a trailing yield of 2.0% on the current share price of ₹1481.1. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. CRISIL paid out more than half (60%) of its earnings last year, which is a regular payout ratio for most companies.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see CRISIL earnings per share are up 3.5% per annum over the last five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, ten years ago, CRISIL has lifted its dividend by approximately 16% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
To Sum It Up
Should investors buy CRISIL for the upcoming dividend? Earnings per share have been growing at a reasonable rate, and the company is paying out a bit over half its earnings as dividends. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're on the fence about its dividend prospects.
Ever wonder what the future holds for CRISIL? See what the three analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
If you're in the market for dividend stocks, we recommend checking our list of top 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 firstname.lastname@example.org. 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.