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There's A Lot To Like About Aarti Industries Limited's (NSE:AARTIIND) Upcoming 0.5% Dividend

Simply Wall St

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 Aarti Industries Limited (NSE:AARTIIND) is about to go ex-dividend in just 3 days. Investors can purchase shares before the 27th of August in order to be eligible for this dividend, which will be paid on the 30th of September.

Aarti Industries's next dividend payment will be ₹7.00 per share, on the back of last year when the company paid a total of ₹8.00 to shareholders. Based on the last year's worth of payments, Aarti Industries has a trailing yield of 1.0% on the current stock price of ₹1467.3. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for Aarti Industries

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Aarti Industries has a low and conservative payout ratio of just 18% of its income after tax. Aarti Industries paid a dividend despite reporting negative free cash flow over the last twelve months. This may be due to heavy investment in the business, but this is still suboptimal from a dividend sustainability perspective.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

NSEI:AARTIIND Historical Dividend Yield, August 23rd 2019

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. It's encouraging to see Aarti Industries has grown its earnings rapidly, up 27% a year for the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Aarti Industries has lifted its dividend by approximately 20% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

Final Takeaway

Is Aarti Industries worth buying for its dividend? It's great that Aarti Industries is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. Aarti Industries looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

Ever wonder what the future holds for Aarti Industries? See what the eight analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

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.

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 editorial-team@simplywallst.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.