Be Sure To Check Out Ashiana Housing Limited (NSE:ASHIANA) Before It Goes Ex-Dividend
Readers hoping to buy Ashiana Housing Limited (NSE:ASHIANA) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Meaning, you will need to purchase Ashiana Housing's shares before the 22nd of September to receive the dividend, which will be paid on the 29th of October.
The company's next dividend payment will be ₹1.50 per share. Last year, in total, the company distributed ₹2.50 to shareholders. Calculating the last year's worth of payments shows that Ashiana Housing has a trailing yield of 0.7% on the current share price of ₹351.45. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Ashiana Housing has a low and conservative payout ratio of just 21% of its income after tax. 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 8.0% of its free cash flow in the last year.
It's positive to see that Ashiana Housing'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.
See our latest analysis for Ashiana Housing
Click here to see how much of its profit Ashiana Housing paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Ashiana Housing has grown its earnings rapidly, up 134% a year for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, Ashiana Housing looks like a promising growth company.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Ashiana Housing has lifted its dividend by approximately 17% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
To Sum It Up
Should investors buy Ashiana Housing for the upcoming dividend? It's great that Ashiana Housing is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. Ashiana Housing looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
On that note, you'll want to research what risks Ashiana Housing is facing. For example, we've found 1 warning sign for Ashiana Housing 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.
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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.