Bannari Amman Spinning Mills Ltd (NSE:BASML) Is About To Go Ex-Dividend, And It Pays A 0.9% Yield
Readers hoping to buy Bannari Amman Spinning Mills Ltd (NSE:BASML) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. In other words, investors can purchase Bannari Amman Spinning Mills' shares before the 3rd of August in order to be eligible for the dividend, which will be paid on the 8th of September.
The company's next dividend payment will be ₹0.25 per share, and in the last 12 months, the company paid a total of ₹0.25 per share. Calculating the last year's worth of payments shows that Bannari Amman Spinning Mills has a trailing yield of 0.9% on the current share price of ₹27.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.
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. Bannari Amman Spinning Mills is paying out just 13% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.
View our latest analysis for Bannari Amman Spinning Mills
Click here to see how much of its profit Bannari Amman Spinning Mills 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. Bannari Amman Spinning Mills's earnings have collapsed faster than Wile E Coyote's schemes to trap the Road Runner; down a tremendous 35% a year over the past five years.
Bannari Amman Spinning Mills also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. It's hard to grow dividends per share when a company keeps creating new shares.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Bannari Amman Spinning Mills has seen its dividend decline 10% per annum on average over the past 10 years, which is not great to see. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.
Final Takeaway
Has Bannari Amman Spinning Mills got what it takes to maintain its dividend payments? Earnings per share have shrunk noticeably in recent years, although we like that the company has a low payout ratio. This could suggest a cut to the dividend may not be a major risk in the near future. We think this is a pretty attractive combination, and would be interested in investigating Bannari Amman Spinning Mills more closely.
So while Bannari Amman Spinning Mills looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Be aware that Bannari Amman Spinning Mills is showing 4 warning signs in our investment analysis, and 1 of those is a bit unpleasant...
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.
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.