Two Days Left Until Saraswati Saree Depot Limited (NSE:SSDL) Trades Ex-Dividend
Readers hoping to buy Saraswati Saree Depot Limited (NSE:SSDL) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Meaning, you will need to purchase Saraswati Saree Depot's shares before the 30th of September to receive the dividend, which will be paid on the 24th of October.
The company's upcoming dividend is ₹3.00 a share, following on from the last 12 months, when the company distributed a total of ₹3.03 per share to shareholders. Last year's total dividend payments show that Saraswati Saree Depot has a trailing yield of 4.1% on the current share price of ₹73.31. 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 Saraswati Saree Depot can afford its dividend, and if the dividend could grow.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Saraswati Saree Depot paid out just 22% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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. It paid out 17% of its free cash flow as dividends last year, which is conservatively low.
It's positive to see that Saraswati Saree Depot'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 Saraswati Saree Depot
Click here to see how much of its profit Saraswati Saree Depot paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Saraswati Saree Depot's earnings have collapsed faster than Wile E Coyote's schemes to trap the Road Runner; down a tremendous 175% a year over the past five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Saraswati Saree Depot's dividend payments per share have declined at 18% per year on average over the past two years, which is uninspiring. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.
The Bottom Line
Has Saraswati Saree Depot got what it takes to maintain its dividend payments? Saraswati Saree Depot 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 Saraswati Saree Depot from a dividend perspective.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example, Saraswati Saree Depot has 3 warning signs (and 1 which can't be ignored) 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.