Be Sure To Check Out Route Mobile Limited (NSE:ROUTE) Before It Goes Ex-Dividend
Route Mobile Limited (NSE:ROUTE) is about to trade ex-dividend in the next day or two. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible 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. This means that investors who purchase Route Mobile's shares on or after the 2nd of November will not receive the dividend, which will be paid on the 26th of November.
The company's upcoming dividend is ₹4.00 a share, following on from the last 12 months, when the company distributed a total of ₹11.00 per share to shareholders. Looking at the last 12 months of distributions, Route Mobile has a trailing yield of approximately 2.5% on its current stock price of ₹438.65. 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! We need to see whether the dividend is covered by earnings and if it's 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. Route Mobile has a low and conservative payout ratio of just 23% of its income after tax. 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. What's good is that dividends were well covered by free cash flow, with the company paying out 20% of its 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.
See our latest analysis for Route Mobile
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. Fortunately for readers, Route Mobile's earnings per share have been growing at 17% 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.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Route Mobile has delivered 41% dividend growth per year on average over the past five years. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
The Bottom Line
Is Route Mobile an attractive dividend stock, or better left on the shelf? It's great that Route Mobile 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. It's a promising combination that should mark this company worthy of closer attention.
While it's tempting to invest in Route Mobile for the dividends alone, you should always be mindful of the risks involved. For example - Route Mobile has 1 warning sign we think you should be aware of.
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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