It looks like Central Depository Services (India) Limited (NSE:CDSL) is about to go ex-dividend in the next 3 days. Investors can purchase shares before the 7th of September in order to be eligible for this dividend, which will be paid on the 15th of October.
Central Depository Services (India)’s next dividend payment will be ₹4.50 per share. Last year, in total, the company distributed ₹4.50 to shareholders. Based on the last year’s worth of payments, Central Depository Services (India) has a trailing yield of 0.9% on the current stock price of ₹483.3. 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 usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That’s why it’s good to see Central Depository Services (India) paying out a modest 38% of its earnings.
Generally speaking, the lower a company’s payout ratios, the more resilient its dividend usually is.
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 fall far enough, the company could be forced to cut its dividend. That’s why it’s comforting to see Central Depository Services (India)’s earnings have been skyrocketing, up 23% per annum for the past five years.
Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. Central Depository Services (India) has delivered an average of 13% per year annual increase in its dividend, based on the past two years of dividend payments. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
Should investors buy Central Depository Services (India) for the upcoming dividend? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. This strategy can add significant value to shareholders over the long term – as long as it’s done without issuing too many new shares. In summary, Central Depository Services (India) appears to have some promise as a dividend stock, and we’d suggest taking a closer look at it.
While it’s tempting to invest in Central Depository Services (India) for the dividends alone, you should always be mindful of the risks involved. For example, we’ve found 2 warning signs for Central Depository Services (India) that we recommend you consider before investing in the business.
We wouldn’t recommend just buying the first dividend stock you see, though. Here’s a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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This article by Simply Wall St is general in nature. 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.
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