Just Three Days Till Avadh Sugar & Energy Limited (NSE:AVADHSUGAR) Will Be Trading Ex-Dividend
Avadh Sugar & Energy Limited (NSE:AVADHSUGAR) stock is about to trade ex-dividend in three 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 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. Meaning, you will need to purchase Avadh Sugar & Energy's shares before the 17th of July to receive the dividend, which will be paid on the 27th of August.
The company's next dividend payment will be ₹10.00 per share, and in the last 12 months, the company paid a total of ₹10.00 per share. Last year's total dividend payments show that Avadh Sugar & Energy has a trailing yield of 1.9% on the current share price of ₹525.45. If you buy this business for its dividend, you should have an idea of whether Avadh Sugar & Energy's dividend is reliable and sustainable. So we need to investigate whether Avadh Sugar & Energy 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. Avadh Sugar & Energy paid out a comfortable 35% of its profit last year. 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. Thankfully its dividend payments took up just 41% of the free cash flow it generated, which is a comfortable payout ratio.
It's positive to see that Avadh Sugar & Energy'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 Avadh Sugar & Energy
Click here to see how much of its profit Avadh Sugar & Energy paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're discomforted by Avadh Sugar & Energy's 5.9% per annum decline in earnings in the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last eight years, Avadh Sugar & Energy has lifted its dividend by approximately 45% a year on average.
Final Takeaway
Is Avadh Sugar & Energy an attractive dividend stock, or better left on the shelf? Avadh Sugar & Energy 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. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.
In light of that, while Avadh Sugar & Energy has an appealing dividend, it's worth knowing the risks involved with this stock. For example, Avadh Sugar & Energy has 3 warning signs (and 2 which don't sit too well with us) we think you should know about.
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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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.