Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see N R Agarwal Industries Limited (NSE:NRAGRINDQ) is about to trade ex-dividend in the next 3 days. This means that investors who purchase shares on or after the 6th of September will not receive the dividend, which will be paid on the 16th of October.
N R Agarwal Industries's next dividend payment will be ₹4.00 per share. Last year, in total, the company distributed ₹4.00 to shareholders. Based on the last year's worth of payments, N R Agarwal Industries stock has a trailing yield of around 1.9% on the current share price of ₹216.6. If you buy this business for its dividend, you should have an idea of whether N R Agarwal Industries's dividend is reliable and sustainable. As a result, readers should always check whether N R Agarwal Industries has been able to grow its dividends, or if the dividend might be cut.
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. N R Agarwal Industries has a low and conservative payout ratio of just 7.6% of its income after tax. 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. Luckily it paid out just 5.7% of its free cash flow last year.
It's positive to see that N R Agarwal Industries'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?
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see N R Agarwal Industries's earnings have been skyrocketing, up 188% per annum for the past five years. N R Agarwal Industries 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.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. N R Agarwal Industries has delivered an average of 15% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
To Sum It Up
Should investors buy N R Agarwal Industries for the upcoming dividend? N R Agarwal Industries has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past ten years, but the conservative payout ratio makes the current dividend look sustainable. It's a promising combination that should mark this company worthy of closer attention.
Want to learn more about N R Agarwal Industries's dividend performance? Check out this visualisation of its historical 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.
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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.