SKM Egg Products Export (India) Limited (NSE:SKMEGGPROD) Looks Like A Good Stock, And It's Going Ex-Dividend Soon
SKM Egg Products Export (India) Limited (NSE:SKMEGGPROD) 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 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. This means that investors who purchase SKM Egg Products Export (India)'s shares on or after the 11th of September will not receive the dividend, which will be paid on the 18th of October.
The company's next dividend payment will be ₹1.25 per share. Last year, in total, the company distributed ₹1.25 to shareholders. Calculating the last year's worth of payments shows that SKM Egg Products Export (India) has a trailing yield of 0.5% on the current share price of ₹257.10. If you buy this business for its dividend, you should have an idea of whether SKM Egg Products Export (India)'s dividend is reliable and sustainable. As a result, readers should always check whether SKM Egg Products Export (India) has been able to grow its dividends, or if the dividend might be cut.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. SKM Egg Products Export (India) has a low and conservative payout ratio of just 6.3% of its income after tax. 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. What's good is that dividends were well covered by free cash flow, with the company paying out 10% of its cash flow last year.
It's positive to see that SKM Egg Products Export (India)'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 SKM Egg Products Export (India)
Click here to see how much of its profit SKM Egg Products Export (India) 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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see SKM Egg Products Export (India)'s earnings have been skyrocketing, up 47% per annum for the past five years. SKM Egg Products Export (India) earnings per share have been sprinting ahead like the Road Runner at a track and field day; scarcely stopping even for a cheeky "beep-beep". We also like that it is reinvesting most of its profits in its business.'
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. SKM Egg Products Export (India) has delivered an average of 9.6% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
To Sum It Up
Should investors buy SKM Egg Products Export (India) for the upcoming dividend? It's great that SKM Egg Products Export (India) is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. There's a lot to like about SKM Egg Products Export (India), and we would prioritise taking a closer look at it.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Be aware that SKM Egg Products Export (India) is showing 2 warning signs in our investment analysis, and 1 of those doesn't sit too well with us...
If you're in the market for strong dividend payers, we recommend checking our selection of top 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.