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 Finolex Cables Limited (NSE:FINCABLES) is about to go ex-dividend in just 3 days. If you purchase the stock on or after the 5th of September, you won't be eligible to receive this dividend, when it is paid on the 17th of October.
Finolex Cables's next dividend payment will be ₹4.50 per share, and in the last 12 months, the company paid a total of ₹4.50 per share. Calculating the last year's worth of payments shows that Finolex Cables has a trailing yield of 1.2% on the current share price of ₹367.2. If you buy this business for its dividend, you should have an idea of whether Finolex Cables's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's 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. Finolex Cables paid out just 18% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether Finolex Cables generated enough free cash flow to afford its dividend. It paid out more than half (55%) of its free cash flow in the past year, which is within an average range for most companies.
It's positive to see that Finolex Cables'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.
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, Finolex Cables's earnings per share have been growing at 13% a year for the past five years. Finolex Cables has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. This is a reasonable combination that could hint at some further dividend increases in the future.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Finolex Cables has increased its dividend at approximately 37% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
Is Finolex Cables worth buying for its dividend? Earnings per share have grown at a nice rate in recent times and over the last year, Finolex Cables paid out less than half its earnings and a bit over half its free cash flow. There's a lot to like about Finolex Cables, and we would prioritise taking a closer look at it.
Curious what other investors think of Finolex Cables? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow .
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting 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.