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Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Future Lifestyle Fashions Limited (NSE:FLFL) is about to go ex-dividend in just 3 days. This means that investors who purchase shares on or after the 22nd of July will not receive the dividend, which will be paid on the 28th of August.
Future Lifestyle Fashions's next dividend payment will be ₹1.40 per share, on the back of last year when the company paid a total of ₹1.40 to shareholders. Last year's total dividend payments show that Future Lifestyle Fashions has a trailing yield of 0.3% on the current share price of ₹466.45. If you buy this business for its dividend, you should have an idea of whether Future Lifestyle Fashions'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. Future Lifestyle Fashions has a low and conservative payout ratio of just 14% of its income after tax. 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. What's good is that dividends were well covered by free cash flow, with the company paying out 18% of its cash flow last year.
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?
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. It's encouraging to see Future Lifestyle Fashions has grown its earnings rapidly, up 45% a year for the past five years.
Future Lifestyle Fashions 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. Future Lifestyle Fashions has delivered 28% dividend growth per year on average over the past 5 years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
Is Future Lifestyle Fashions worth buying for its dividend? Future Lifestyle Fashions has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. Future Lifestyle Fashions looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
Ever wonder what the future holds for Future Lifestyle Fashions? See what the nine 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 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.