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Is It Smart To Buy Saksoft Limited (NSE:SAKSOFT) Before It Goes Ex-Dividend?
Readers hoping to buy Saksoft Limited (NSE:SAKSOFT) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Therefore, if you purchase Saksoft's shares on or after the 9th of November, you won't be eligible to receive the dividend, when it is paid on the 4th of December.
The company's next dividend payment will be ₹0.50 per share, and in the last 12 months, the company paid a total of ₹1.10 per share. Last year's total dividend payments show that Saksoft has a trailing yield of 0.8% on the current share price of ₹133.39. If you buy this business for its dividend, you should have an idea of whether Saksoft's dividend is reliable and sustainable. So we need to investigate whether Saksoft can afford its dividend, and if the dividend could grow.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Saksoft has a low and conservative payout ratio of just 5.6% of its income after tax. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Luckily it paid out just 7.9% of its free cash flow last year.
It's positive to see that Saksoft'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 Saksoft
Click here to see how much of its profit Saksoft 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Saksoft has grown its earnings rapidly, up 22% a year for the past five years. Saksoft looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Saksoft has delivered an average of 16% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
To Sum It Up
From a dividend perspective, should investors buy or avoid Saksoft? We love that Saksoft is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. Overall we think this is an attractive combination and worthy of further research.
Keen to explore more data on Saksoft's financial performance? Check out our visualisation of its historical revenue and earnings growth.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
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