There's A Lot To Like About L&T Technology Services' (NSE:LTTS) Upcoming ₹20.00 Dividend
It looks like L&T Technology Services Limited (NSE:LTTS) is about to go ex-dividend in the next two 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. Meaning, you will need to purchase L&T Technology Services' shares before the 27th of October to receive the dividend, which will be paid on the 18th of November.
The company's next dividend payment will be ₹20.00 per share, on the back of last year when the company paid a total of ₹58.00 to shareholders. Last year's total dividend payments show that L&T Technology Services has a trailing yield of 1.5% on the current share price of ₹3910.30. If you buy this business for its dividend, you should have an idea of whether L&T Technology Services's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's 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. L&T Technology Services paid out a comfortable 29% of its profit last year. 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. It distributed 46% of its free cash flow as dividends, a comfortable payout level for most companies.
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.
See our latest analysis for L&T Technology Services
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see L&T Technology Services's earnings per share have risen 15% per annum over the last five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, L&T Technology Services has increased its dividend at approximately 25% 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.
Final Takeaway
From a dividend perspective, should investors buy or avoid L&T Technology Services? L&T Technology Services has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. There's a lot to like about L&T Technology Services, and we would prioritise taking a closer look at it.
While it's tempting to invest in L&T Technology Services for the dividends alone, you should always be mindful of the risks involved. In terms of investment risks, we've identified 1 warning sign with L&T Technology Services and understanding them should be part of your investment process.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
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