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Here's What We Like About Rain Industries' (NSE:RAIN) Upcoming Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Rain Industries Limited (NSE:RAIN) is about to trade ex-dividend in the next three 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 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. This means that investors who purchase Rain Industries' shares on or after the 13th of November will not receive the dividend, which will be paid on the 1st of December.
The company's next dividend payment will be ₹0.50 per share. Last year, in total, the company distributed ₹1.00 to shareholders. Based on the last year's worth of payments, Rain Industries has a trailing yield of 0.6% on the current stock price of ₹175.05. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. 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. The good news is it paid out just 4.1% of its free cash flow in the last year.
See our latest analysis for Rain Industries
Click here to see how much of its profit Rain Industries paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're encouraged by the steady growth at Rain Industries, with earnings per share up 2.8% on average over the last five years. Earnings per share growth in recent times has not been a standout. Yet there are several ways to grow the dividend, and one of them is simply that the company may choose to pay out more of its earnings as dividends.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Rain Industries's dividend payments are effectively flat on where they were 10 years ago.
The Bottom Line
Is Rain Industries an attractive dividend stock, or better left on the shelf? Earnings per share growth has been growing somewhat, and Rain Industries is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Rain Industries is halfway there. There's a lot to like about Rain Industries, and we would prioritise taking a closer look at it.
On that note, you'll want to research what risks Rain Industries is facing. For instance, we've identified 3 warning signs for Rain Industries (2 are concerning) 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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