Two Days Left Until Torrent Pharmaceuticals Limited (NSE:TORNTPHARM) Trades Ex-Dividend
Torrent Pharmaceuticals Limited (NSE:TORNTPHARM) is about to trade ex-dividend in the next two days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. Accordingly, Torrent Pharmaceuticals investors that purchase the stock on or after the 29th of May will not receive the dividend, which will be paid on the 1st of January.
The company's next dividend payment will be ₹9.00 per share, and in the last 12 months, the company paid a total of ₹38.00 per share. Looking at the last 12 months of distributions, Torrent Pharmaceuticals has a trailing yield of approximately 0.8% on its current stock price of ₹4572.60. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
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. Torrent Pharmaceuticals paid out 59% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Over the last year it paid out 55% of its free cash flow as dividends, within the usual range for most companies.
It's positive to see that Torrent Pharmaceuticals'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 Torrent Pharmaceuticals
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, Torrent Pharmaceuticals's earnings per share have been growing at 12% a year for the past five years. Torrent Pharmaceuticals has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. This is a reasonable combination that could hint at some further dividend increases in the future.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Torrent Pharmaceuticals has delivered an average of 11% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
Final Takeaway
Is Torrent Pharmaceuticals an attractive dividend stock, or better left on the shelf? It's good to see earnings are growing, since all of the best dividend stocks grow their earnings meaningfully over the long run. That's why we're glad to see Torrent Pharmaceuticals's earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow - 59% and 55% respectively. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Torrent Pharmaceuticals's dividend merits.
In light of that, while Torrent Pharmaceuticals has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 2 warning signs for Torrent Pharmaceuticals that we recommend you consider before investing in the business.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.