Interested In Relaxo Footwears' (NSE:RELAXO) Upcoming ₹3.50 Dividend? You Have Three Days Left
It looks like Relaxo Footwears Limited (NSE:RELAXO) 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Therefore, if you purchase Relaxo Footwears' shares on or after the 18th of September, you won't be eligible to receive the dividend, when it is paid on the 23rd of October.
The company's next dividend payment will be ₹3.50 per share. Last year, in total, the company distributed ₹3.50 to shareholders. Based on the last year's worth of payments, Relaxo Footwears stock has a trailing yield of around 1.1% on the current share price of ₹324.95. If you buy this business for its dividend, you should have an idea of whether Relaxo Footwears's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Relaxo Footwears's payout ratio is modest, at just 49% of profit. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Fortunately, it paid out only 35% of its free cash flow in the past year.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
View our latest analysis for Relaxo Footwears
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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. Readers will understand then, why we're concerned to see Relaxo Footwears's earnings per share have dropped 8.7% a year over the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Relaxo Footwears has lifted its dividend by approximately 28% a year on average.
Final Takeaway
Should investors buy Relaxo Footwears for the upcoming dividend? Relaxo Footwears 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. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Relaxo Footwears's dividend merits.
On that note, you'll want to research what risks Relaxo Footwears is facing. Every company has risks, and we've spotted 1 warning sign for Relaxo Footwears you should know about.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.