Be Sure To Check Out Filatex India Limited (NSE:FILATEX) Before It Goes Ex-Dividend
It looks like Filatex India Limited (NSE:FILATEX) is about to go ex-dividend in the next three days. 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase Filatex India's shares before the 15th of September in order to receive the dividend, which the company will pay on the 22nd of October.
The company's next dividend payment will be ₹0.30 per share, on the back of last year when the company paid a total of ₹0.30 to shareholders. Looking at the last 12 months of distributions, Filatex India has a trailing yield of approximately 0.4% on its current stock price of ₹76.25. If you buy this business for its dividend, you should have an idea of whether Filatex India's dividend is reliable and sustainable. So we need to investigate whether Filatex India can afford its dividend, and if the dividend could grow.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Filatex India paid out just 7.3% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. The good news is it paid out just 21% of its free cash flow in the last year.
It's positive to see that Filatex India'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 Filatex India
Click here to see how much of its profit Filatex India 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. With that in mind, we're encouraged by the steady growth at Filatex India, with earnings per share up 2.8% on average over the last five years. Filatex India 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. In the past five years, Filatex India has increased its dividend at approximately 8.4% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
The Bottom Line
Should investors buy Filatex India for the upcoming dividend? Earnings per share have been growing moderately, and Filatex India 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 Filatex India is halfway there. There's a lot to like about Filatex India, and we would prioritise taking a closer look at it.
In light of that, while Filatex India has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 3 warning signs for Filatex India that we strongly recommend you have a look at before investing in the company.
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.