Entertainment Network (India) Limited (NSE:ENIL) Will Pay A ₹2.00 Dividend In Three Days

It looks like Entertainment Network (India) Limited (NSE:ENIL) is about to go ex-dividend in the next 3 days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. 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. Accordingly, Entertainment Network (India) investors that purchase the stock on or after the 18th of September will not receive the dividend, which will be paid on the 25th of October.

The company's next dividend payment will be ₹2.00 per share, on the back of last year when the company paid a total of ₹2.00 to shareholders. Based on the last year's worth of payments, Entertainment Network (India) has a trailing yield of 2.0% on the current stock price of ₹101.24. If you buy this business for its dividend, you should have an idea of whether Entertainment Network (India)'s dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are 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. Entertainment Network (India) reported a loss last year, so it's not great to see that it has continued paying a dividend. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If Entertainment Network (India) didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. Luckily it paid out just 14% of its free cash flow last year.

Check out our latest analysis for Entertainment Network (India)

Click here to see how much of its profit Entertainment Network (India) paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Entertainment Network (India) was unprofitable last year, but at least the general trend suggests its earnings have been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Entertainment Network (India) has delivered 7.2% dividend growth per year on average over the past 10 years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Remember, you can always get a snapshot of Entertainment Network (India)'s financial health, by checking our visualisation of its financial health, here.

The Bottom Line

From a dividend perspective, should investors buy or avoid Entertainment Network (India)? It's hard to get used to Entertainment Network (India) paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. Overall, it's hard to get excited about Entertainment Network (India) from a dividend perspective.

While it's tempting to invest in Entertainment Network (India) for the dividends alone, you should always be mindful of the risks involved. Case in point: We've spotted 2 warning signs for Entertainment Network (India) 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.