Interested In Cheviot's (NSE:CHEVIOT) Upcoming ₹25.00 Dividend? You Have Three Days Left

It looks like Cheviot Company Limited (NSE:CHEVIOT) is about to go ex-dividend in the next 3 days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase Cheviot's shares on or after the 30th of July, you won't be eligible to receive the dividend, when it is paid on the 5th of September.

The company's next dividend payment will be ₹25.00 per share, and in the last 12 months, the company paid a total of ₹25.00 per share. Based on the last year's worth of payments, Cheviot stock has a trailing yield of around 2.2% on the current share price of ₹1153.60. 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.

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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. Cheviot paid out a comfortable 28% of its profit last year. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. The good news is it paid out just 9.5% of its free cash flow in the last year.

It's positive to see that Cheviot'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.

View our latest analysis for Cheviot

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

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Cheviot's earnings per share have fallen at approximately 5.7% a year over the previous five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Cheviot has delivered 8.2% dividend growth per year on average over the past 10 years.

To Sum It Up

Has Cheviot got what it takes to maintain its dividend payments? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

While it's tempting to invest in Cheviot for the dividends alone, you should always be mindful of the risks involved. To that end, you should learn about the 3 warning signs we've spotted with Cheviot (including 1 which is a bit unpleasant).

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.