Exide Industries Limited (NSE:EXIDEIND) Looks Interesting, And It's About To Pay A Dividend
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Exide Industries Limited (NSE:EXIDEIND) is about to go ex-dividend in just 3 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. This means that investors who purchase Exide Industries' shares on or after the 3rd of July will not receive the dividend, which will be paid on the 9th of August.
The company's next dividend payment will be ₹2.00 per share, and in the last 12 months, the company paid a total of ₹2.00 per share. Looking at the last 12 months of distributions, Exide Industries has a trailing yield of approximately 0.5% on its current stock price of ₹389.80. If you buy this business for its dividend, you should have an idea of whether Exide Industries's dividend is reliable and sustainable. As a result, readers should always check whether Exide Industries 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. Exide Industries has a low and conservative payout ratio of just 20% of its income after tax. A useful secondary check can be to evaluate whether Exide Industries generated enough free cash flow to afford its dividend. It paid out 13% of its free cash flow as dividends last year, which is conservatively low.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
View our latest analysis for Exide Industries
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. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Exide Industries, with earnings per share up 2.9% on average over the last five years. Exide Industries is retaining more than three-quarters of its earnings and has a history of generating some growth in earnings. We think this is a reasonable combination.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Exide Industries's dividend payments per share have declined at 0.9% per year on average over the past 10 years, which is uninspiring.
Final Takeaway
Has Exide Industries got what it takes to maintain its dividend payments? Earnings per share have been growing moderately, and Exide Industries is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Exide Industries is halfway there. Exide Industries looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
On that note, you'll want to research what risks Exide Industries is facing. To help with this, we've discovered 1 warning sign for Exide Industries that you should be aware of before investing in their shares.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.