It looks like Tips Industries Limited (NSE:TIPSINDLTD) is about to go ex-dividend in the next 3 days. You will need to purchase shares before the 13th of September to receive the dividend, which will be paid on the 22nd of October.
Tips Industries's next dividend payment will be ₹1.00 per share. Last year, in total, the company distributed ₹1.00 to shareholders. Last year's total dividend payments show that Tips Industries has a trailing yield of 1.6% on the current share price of ₹62.1. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Tips Industries paid out just 25% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.
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. For this reason, we're glad to see Tips Industries's earnings per share have risen 12% per annum over the last five years. Earnings per share are growing rapidly and the company is keeping more than half of its earnings within the business; an attractive combination which could suggest the company is focused on reinvesting to grow earnings further. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Tips Industries has seen its dividend decline 0.9% per annum on average over the past 10 years, which is not great to see.
Has Tips Industries got what it takes to maintain its dividend payments? It's great that Tips 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. There's a lot to like about Tips Industries, and we would prioritise taking a closer look at it.
Keen to explore more data on Tips Industries's financial performance? Check out our visualisation of its historical revenue and earnings growth.
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.
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