Shriro Holdings Limited (ASX:SHM) Looks Interesting, And It's About To Pay A Dividend
Readers hoping to buy Shriro Holdings Limited (ASX:SHM) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. If you purchase the stock on or after the 16th of March, you won't be eligible to receive this dividend, when it is paid on the 7th of April.
Shriro Holdings's next dividend payment will be AU$0.04 per share, on the back of last year when the company paid a total of AU$0.07 to shareholders. Based on the last year's worth of payments, Shriro Holdings stock has a trailing yield of around 7.5% on the current share price of A$0.935. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether Shriro Holdings has been able to grow its dividends, or if the dividend might be cut.
View our latest analysis for Shriro Holdings
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Shriro Holdings paying out a modest 37% of its earnings. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Fortunately, it paid out only 28% of its free cash flow in the past year.
It's positive to see that Shriro Holdings'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.
Click here to see how much of its profit Shriro Holdings paid out over the last 12 months.
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see Shriro Holdings's earnings per share have risen 16% per annum over the last five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Shriro Holdings has delivered 3.1% dividend growth per year on average over the past five years. Earnings per share have been growing much quicker than dividends, potentially because Shriro Holdings is keeping back more of its profits to grow the business.
Final Takeaway
Is Shriro Holdings an attractive dividend stock, or better left on the shelf? Shriro Holdings has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past five years, but the conservative payout ratio makes the current dividend look sustainable. There's a lot to like about Shriro Holdings, and we would prioritise taking a closer look at it.
So while Shriro Holdings looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example, Shriro Holdings has 4 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.
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.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
