Interested In Uniparts India's (NSE:UNIPARTS) Upcoming ₹9.00 Dividend? You Have Two Days Left
It looks like Uniparts India Limited (NSE:UNIPARTS) is about to go ex-dividend in the next 2 days. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Meaning, you will need to purchase Uniparts India's shares before the 12th of August to receive the dividend, which will be paid on the 3rd of September.
The company's next dividend payment will be ₹9.00 per share. Last year, in total, the company distributed ₹15.25 to shareholders. Looking at the last 12 months of distributions, Uniparts India has a trailing yield of approximately 1.9% on its current stock price of ₹814.60. 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. Uniparts India is paying out just 18% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. A useful secondary check can be to evaluate whether Uniparts India generated enough free cash flow to afford its dividend. Uniparts India paid out more free cash flow than it generated - 119%, to be precise - last year, which we think is concerningly high. It's hard to consistently pay out more cash than you generate without either borrowing or using company cash, so we'd wonder how the company justifies this payout level.
Uniparts India paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Cash is king, as they say, and were Uniparts India to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.
See our latest analysis for Uniparts India
Click here to see how much of its profit Uniparts India paid out over the last 12 months.
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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, Uniparts India's earnings per share have been growing at 14% a year for the past five years. Earnings have been growing at a decent rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Uniparts India has seen its dividend decline 2.6% per annum on average over the past three years, which is not great to see. Uniparts India is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.
The Bottom Line
Should investors buy Uniparts India for the upcoming dividend? We're glad to see the company has been improving its earnings per share while also paying out a low percentage of income. However, it's not great to see it paying out what we see as an uncomfortably high percentage of its cash flow. To summarise, Uniparts India looks okay on this analysis, although it doesn't appear a stand-out opportunity.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Every company has risks, and we've spotted 2 warning signs for Uniparts India (of which 1 is concerning!) you should know about.
If you're in the market for strong dividend payers, we recommend checking our selection of top 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.