Why You Might Be Interested In Gandhi Special Tubes Limited (NSE:GANDHITUBE) For Its Upcoming Dividend
Gandhi Special Tubes Limited (NSE:GANDHITUBE) stock is about to trade ex-dividend in three 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 of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. This means that investors who purchase Gandhi Special Tubes' shares on or after the 5th of August will not receive the dividend, which will be paid on the 11th of September.
The company's next dividend payment will be ₹15.00 per share, and in the last 12 months, the company paid a total of ₹15.00 per share. Looking at the last 12 months of distributions, Gandhi Special Tubes has a trailing yield of approximately 1.7% on its current stock price of ₹876.35. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Gandhi Special Tubes paid out a comfortable 27% of its profit last year. A useful secondary check can be to evaluate whether Gandhi Special Tubes generated enough free cash flow to afford its dividend. Fortunately, it paid out only 34% of its free cash flow in the past year.
It's positive to see that Gandhi Special Tubes'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.
View our latest analysis for Gandhi Special Tubes
Click here to see how much of its profit Gandhi Special Tubes paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. 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, Gandhi Special Tubes's earnings per share have been growing at 15% a year for the past five years. Earnings per share are growing rapidly and the company is keeping more than half of its earnings within the business; an attractive combination which could suggest the company is focused on reinvesting to grow earnings further. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Gandhi Special Tubes has delivered an average of 7.2% 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.
The Bottom Line
Has Gandhi Special Tubes got what it takes to maintain its dividend payments? We love that Gandhi Special Tubes is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. Overall we think this is an attractive combination and worthy of further research.
Curious about whether Gandhi Special Tubes has been able to consistently generate growth? Here's a chart of its historical revenue and earnings growth.
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.
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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.