Coral India Finance and Housing Limited (NSE:CORALFINAC) stock is about to trade ex-dividend in 3 days time. This means that investors who purchase shares on or after the 22nd of August will not receive the dividend, which will be paid on the 27th of September.
Coral India Finance and Housing's next dividend payment will be ₹0.20 per share, on the back of last year when the company paid a total of ₹0.20 to shareholders. Last year's total dividend payments show that Coral India Finance and Housing has a trailing yield of 1.6% on the current share price of ₹12.55. If you buy this business for its dividend, you should have an idea of whether Coral India Finance and Housing's dividend is reliable and sustainable. 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. Coral India Finance and Housing is paying out just 10% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It distributed 26% of its free cash flow as dividends, a comfortable payout level for most companies.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see Coral India Finance and Housing earnings per share are up 7.8% per annum over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. Organisations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Coral India Finance and Housing's dividend payments are broadly unchanged compared to where they were five years ago.
To Sum It Up
Should investors buy Coral India Finance and Housing for the upcoming dividend? Earnings per share have been growing moderately, and Coral India Finance and Housing is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. It might be nice to see earnings growing faster, but Coral India Finance and Housing is being conservative with its dividend payouts and could still perform reasonably over the long run. Overall we think this is an attractive combination and worthy of further research.
Want to learn more about Coral India Finance and Housing? Here's a visualisation of its historical rate of revenue and earnings growth.
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.