Alicon Castalloy Limited (NSE:ALICON) Is About To Go Ex-Dividend, And It Pays A 0.7% Yield
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Alicon Castalloy Limited (NSE:ALICON) is about to go ex-dividend in just 3 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 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 Alicon Castalloy's shares before the 21st of September in order to receive the dividend, which the company will pay on the 28th of October.
The company's upcoming dividend is ₹3.00 a share, following on from the last 12 months, when the company distributed a total of ₹5.00 per share to shareholders. Based on the last year's worth of payments, Alicon Castalloy has a trailing yield of 0.7% on the current stock price of ₹688.35. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Alicon Castalloy has a low and conservative payout ratio of just 24% of its income after tax. A useful secondary check can be to evaluate whether Alicon Castalloy generated enough free cash flow to afford its dividend. Luckily it paid out just 9.8% of its free cash flow last 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.
Check out our latest analysis for Alicon Castalloy
Click here to see how much of its profit Alicon Castalloy paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings fall far enough, the company could be forced to cut its dividend. That explains why we're not overly excited about Alicon Castalloy's flat earnings over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, Alicon Castalloy has lifted its dividend by approximately 5.2% a year on average.
To Sum It Up
Should investors buy Alicon Castalloy for the upcoming dividend? Earnings per share have been flat, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend gets cut. To summarise, Alicon Castalloy looks okay on this analysis, although it doesn't appear a stand-out opportunity.
So while Alicon Castalloy looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Be aware that Alicon Castalloy is showing 2 warning signs in our investment analysis, and 1 of those is potentially serious...
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.