Tega Industries Limited (NSE:TEGA) Stock Goes Ex-Dividend In Just Three Days
It looks like Tega Industries Limited (NSE:TEGA) is about to go ex-dividend in the next three days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. 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. Therefore, if you purchase Tega Industries' shares on or after the 11th of September, you won't be eligible to receive the dividend, when it is paid on the 24th of October.
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, Tega Industries has a trailing yield of approximately 0.1% on its current stock price of ₹1548.00. 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. Tega Industries is paying out just 9.7% 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 Tega Industries generated enough free cash flow to afford its dividend. It paid out 6.2% of its free cash flow as dividends last year, which is conservatively low.
It's positive to see that Tega Industries'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 Tega Industries
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. Tega Industries'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.
Tega Industries 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. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. It looks like the Tega Industries dividends are largely the same as they were three years ago. If a company's dividend stays flat while earnings are in decline, this is typically a sign that it is paying out a larger percentage of its earnings. This can become unsustainable if earnings fall far enough.
Final Takeaway
Is Tega Industries an attractive dividend stock, or better left on the shelf? Tega Industries has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. To summarise, Tega Industries looks okay on this analysis, although it doesn't appear a stand-out opportunity.
So while Tega Industries looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example, we've found 2 warning signs for Tega Industries 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.