Read This Before Considering Zee Entertainment Enterprises Limited (NSE:ZEEL) For Its Upcoming ₹2.00 Dividend

It looks like Zee Entertainment Enterprises Limited (NSE:ZEEL) 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. Thus, you can purchase Zee Entertainment Enterprises' shares before the 10th of September in order to receive the dividend, which the company will pay on the 17th of October.

The company's upcoming dividend is ₹2.00 a share, following on from the last 12 months, when the company distributed a total of ₹2.00 per share to shareholders. Calculating the last year's worth of payments shows that Zee Entertainment Enterprises has a trailing yield of 2.2% on the current share price of ₹91.61. If you buy this business for its dividend, you should have an idea of whether Zee Entertainment Enterprises's dividend is reliable and sustainable. As a result, readers should always check whether Zee Entertainment Enterprises has been able to grow its dividends, or if the dividend might be cut.

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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. Zee Entertainment Enterprises is paying out an acceptable 70% of its profit, a common payout level among most companies. 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. It distributed 43% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that Zee Entertainment Enterprises'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 Zee Entertainment Enterprises

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

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. Zee Entertainment Enterprises's earnings per share have fallen at approximately 24% a year over the previous five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Zee Entertainment Enterprises has seen its dividend decline 1.2% per annum on average over the past 10 years, which is not great to see.

Final Takeaway

From a dividend perspective, should investors buy or avoid Zee Entertainment Enterprises? We're not enthused by the declining earnings per share, although at least the company's payout ratio is within a reasonable range, meaning it may not be at imminent risk of a dividend cut. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.

If you're not too concerned about Zee Entertainment Enterprises's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. For example - Zee Entertainment Enterprises has 3 warning signs we think 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.

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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.