The Lakshmi Mills Company Limited (NSE:LAKSHMIMIL) Stock Goes Ex-Dividend In Just Three Days

The Lakshmi Mills Company Limited (NSE:LAKSHMIMIL) is about to trade ex-dividend in the next 3 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. In other words, investors can purchase Lakshmi Mills' shares before the 18th of September in order to be eligible for the dividend, which will be paid on the 25th of October.

The company's next dividend payment will be ₹10.00 per share. Last year, in total, the company distributed ₹10.00 to shareholders. Looking at the last 12 months of distributions, Lakshmi Mills has a trailing yield of approximately 0.1% on its current stock price of ₹7800.00. 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! So we need to investigate whether Lakshmi Mills can afford its dividend, and if the dividend could grow.

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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. Lakshmi Mills reported a loss after tax last year, which means it's paying a dividend despite being unprofitable. While this might be a one-off event, this is unlikely to be sustainable in the long term. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 0.3% of its cash flow last year.

View our latest analysis for Lakshmi Mills

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

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Lakshmi Mills's earnings have been skyrocketing, up 21% per annum for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Lakshmi Mills has seen its dividend decline 4.0% per annum on average over the past 10 years, which is not great to see. Lakshmi Mills is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

Final Takeaway

Should investors buy Lakshmi Mills for the upcoming dividend? Earnings per share have been rising nicely although, even though its cashflow payout ratio is low, we question why Lakshmi Mills is paying out so much of its profit. Overall, it's hard to get excited about Lakshmi Mills from a dividend perspective.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Every company has risks, and we've spotted 2 warning signs for Lakshmi Mills (of which 1 is potentially serious!) you should know about.

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.