Dividend Investors: Don't Be Too Quick To Buy Ashiana Housing Limited (NSE:ASHIANA) For Its Upcoming Dividend

Ashiana Housing Limited (NSE:ASHIANA) is about to trade ex-dividend in the next 3 days. You will need to purchase shares before the 10th of August to receive the dividend, which will be paid on the 17th of September.

Ashiana Housing's next dividend payment will be ₹0.30 per share. Last year, in total, the company distributed ₹0.30 to shareholders. Based on the last year's worth of payments, Ashiana Housing has a trailing yield of 0.5% on the current stock price of ₹59.75. If you buy this business for its dividend, you should have an idea of whether Ashiana Housing's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Ashiana Housing

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. Ashiana Housing's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. It paid out 11% of its free cash flow as dividends last year, which is conservatively low.

Click here to see how much of its profit Ashiana Housing paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Ashiana Housing reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Ashiana Housing's dividend payments per share have declined at 1.7% per year on average over the past nine years, which is uninspiring.

We update our analysis on Ashiana Housing every 24 hours, so you can always get the latest insights on its financial health, here.

The Bottom Line

From a dividend perspective, should investors buy or avoid Ashiana Housing? It's hard to get used to Ashiana Housing paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. Overall it doesn't look like the most suitable dividend stock for a long-term buy and hold investor.

With that being said, if you're still considering Ashiana Housing as an investment, you'll find it beneficial to know what risks this stock is facing. Be aware that Ashiana Housing is showing 3 warning signs in our investment analysis, and 1 of those is a bit concerning...

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising 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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