Reliance Chemotex Industries Limited (NSE:RELCHEMQ) Goes Ex-Dividend Soon

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Reliance Chemotex Industries Limited (NSE:RELCHEMQ) is about to trade ex-dividend in the next three days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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 Reliance Chemotex Industries' shares on or after the 18th of September, you won't be eligible to receive the dividend, when it is paid on the 24th of October.

The company's next dividend payment will be ₹0.50 per share, and in the last 12 months, the company paid a total of ₹0.50 per share. Based on the last year's worth of payments, Reliance Chemotex Industries has a trailing yield of 0.4% on the current stock price of ₹110.23. If you buy this business for its dividend, you should have an idea of whether Reliance Chemotex Industries's dividend is reliable and sustainable. So we need to investigate whether Reliance Chemotex Industries can afford its dividend, and if the dividend could grow.

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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. Reliance Chemotex Industries paid out just 7.2% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether Reliance Chemotex Industries generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 1.8% of its cash flow last year.

It's positive to see that Reliance Chemotex Industries'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 Reliance Chemotex Industries

Click here to see how much of its profit Reliance Chemotex Industries 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. That's why it's not ideal to see Reliance Chemotex Industries's earnings per share have been shrinking at 4.3% a year over the previous five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Reliance Chemotex Industries has seen its dividend decline 6.7% per annum on average over the past 10 years, which is not great to see. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.

The Bottom Line

From a dividend perspective, should investors buy or avoid Reliance Chemotex Industries? Reliance Chemotex Industries 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. To summarise, Reliance Chemotex Industries looks okay on this analysis, although it doesn't appear a stand-out opportunity.

On that note, you'll want to research what risks Reliance Chemotex Industries is facing. For example, we've found 4 warning signs for Reliance Chemotex Industries (3 shouldn't be ignored!) that deserve your attention before investing in the shares.

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.