Three Days Left To Buy GMM Pfaudler Limited (NSE:GMMPFAUDLR) Before The Ex-Dividend Date

It looks like GMM Pfaudler Limited (NSE:GMMPFAUDLR) is about to go ex-dividend in the next 3 days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase GMM Pfaudler's shares on or after the 28th of July, you won't be eligible to receive the dividend, when it is paid on the 3rd of September.

The company's next dividend payment will be ₹1.00 per share, and in the last 12 months, the company paid a total of ₹2.00 per share. Based on the last year's worth of payments, GMM Pfaudler has a trailing yield of 0.3% on the current stock price of ₹796.50. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

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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. GMM Pfaudler is paying out just 16% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. 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. Luckily it paid out just 2.8% of its free 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.

See our latest analysis for GMM Pfaudler

Click here to see how much of its profit GMM Pfaudler paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. GMM Pfaudler's earnings per share have fallen at approximately 5.1% a year over the previous five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, GMM Pfaudler has lifted its dividend by approximately 7.2% a year on average.

To Sum It Up

Has GMM Pfaudler got what it takes to maintain its dividend payments? GMM Pfaudler has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of GMM Pfaudler's dividend merits.

In light of that, while GMM Pfaudler has an appealing dividend, it's worth knowing the risks involved with this stock. For instance, we've identified 2 warning signs for GMM Pfaudler (1 is a bit unpleasant) you should be aware of.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.