Is It Worth Considering Batliboi Limited (NSE:BATLIBOI) For Its Upcoming Dividend?

Batliboi Limited (NSE:BATLIBOI) is about to trade ex-dividend in the next three days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order 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. Accordingly, Batliboi investors that purchase the stock on or after the 31st of July will not receive the dividend, which will be paid on the 6th of September.

The company's upcoming dividend is ₹0.60 a share, following on from the last 12 months, when the company distributed a total of ₹0.60 per share to shareholders. Based on the last year's worth of payments, Batliboi stock has a trailing yield of around 0.7% on the current share price of ₹84.93. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

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. Fortunately Batliboi's payout ratio is modest, at just 50% of profit. A useful secondary check can be to evaluate whether Batliboi generated enough free cash flow to afford its dividend. It distributed 49% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that Batliboi'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.

Check out our latest analysis for Batliboi

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

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're discomforted by Batliboi's 16% per annum decline in earnings in the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, two years ago, Batliboi has lifted its dividend by approximately 9.5% a year on average.

Final Takeaway

Has Batliboi got what it takes to maintain its dividend payments? Batliboi 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. In summary, it's hard to get excited about Batliboi from a dividend perspective.

In light of that, while Batliboi has an appealing dividend, it's worth knowing the risks involved with this stock. Case in point: We've spotted 3 warning signs for Batliboi you should be aware of.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.