Should You Buy Central Mine Planning & Design Institute Limited (NSE:CMPDI) For Its Upcoming Dividend?
It looks like Central Mine Planning & Design Institute Limited (NSE:CMPDI) is about to go ex-dividend in the next 2 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 as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, Central Mine Planning & Design Institute investors that purchase the stock on or after the 29th of October will not receive the dividend, which will be paid on the 22nd of November.
The company's next dividend payment will be ₹1.05 per share, and in the last 12 months, the company paid a total of ₹2.10 per share. Last year's total dividend payments show that Central Mine Planning & Design Institute has a trailing yield of 1.1% on the current share price of ₹183.97. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Central Mine Planning & Design Institute has been able to grow its dividends, or if the dividend might be cut.
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. Central Mine Planning & Design Institute has a low and conservative payout ratio of just 25% of its income after tax. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Fortunately, it paid out only 42% 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.
Check out our latest analysis for Central Mine Planning & Design Institute
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. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, Central Mine Planning & Design Institute's earnings per share have been growing at 16% a year for the past five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.
Unfortunately Central Mine Planning & Design Institute has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.
The Bottom Line
Is Central Mine Planning & Design Institute worth buying for its dividend? We love that Central Mine Planning & Design Institute is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. There's a lot to like about Central Mine Planning & Design Institute, and we would prioritise taking a closer look at it.
Want to learn more about Central Mine Planning & Design Institute's dividend performance? Check out this visualisation of its historical revenue and earnings growth.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
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