Three Days Left Until NCL Industries Limited (NSE:NCLIND) Trades Ex-Dividend
It looks like NCL Industries Limited (NSE:NCLIND) is about to go 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, NCL Industries investors that purchase the stock on or after the 11th of September will not receive the dividend, which will be paid on the 17th of October.
The company's next dividend payment will be ₹2.00 per share, and in the last 12 months, the company paid a total of ₹3.50 per share. Based on the last year's worth of payments, NCL Industries stock has a trailing yield of around 2.0% on the current share price of ₹177.81. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether NCL Industries can afford its dividend, and if the dividend could grow.
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. NCL Industries has a low and conservative payout ratio of just 13% of its income after tax. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Thankfully its dividend payments took up just 45% of the free cash flow it generated, which is a comfortable payout ratio.
It's positive to see that NCL Industries'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.
See our latest analysis for NCL Industries
Click here to see how much of its profit NCL Industries paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's not ideal to see NCL Industries's earnings per share have been shrinking at 3.9% a year over the previous five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, NCL Industries has increased its dividend at approximately 5.8% a year on average.
Final Takeaway
Should investors buy NCL Industries for the upcoming dividend? NCL Industries 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. In summary, it's hard to get excited about NCL Industries from a dividend perspective.
In light of that, while NCL Industries has an appealing dividend, it's worth knowing the risks involved with this stock. For example, NCL Industries has 3 warning signs (and 1 which doesn't sit too well with us) we think 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.