Do These 3 Checks Before Buying TTK Healthcare Limited (NSE:TTKHLTCARE) For Its Upcoming Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that TTK Healthcare Limited (NSE:TTKHLTCARE) is about to go ex-dividend in just three days. Ex-dividend means that investors that purchase the stock on or after the 3rd of September will not receive this dividend, which will be paid on the 30th of September.

TTK Healthcare's next dividend payment will be ₹3.00 per share, and in the last 12 months, the company paid a total of ₹3.00 per share. Calculating the last year's worth of payments shows that TTK Healthcare has a trailing yield of 0.6% on the current share price of ₹488.25. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for TTK Healthcare

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. TTK Healthcare is paying out an acceptable 68% of its profit, a common payout level among most companies. 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. The company paid out 93% of its free cash flow over the last year, which we think is outside the ideal range for most businesses. Companies usually need cash more than they need earnings - expenses don't pay themselves - so it's not great to see it paying out so much of its cash flow.

While TTK Healthcare's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Were this to happen repeatedly, this would be a risk to TTK Healthcare's ability to maintain its dividend.

Click here to see how much of its profit TTK Healthcare 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 earnings fall far enough, the company could be forced to cut its dividend. TTK Healthcare's earnings per share have fallen at approximately 27% a year over the previous five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. TTK Healthcare has seen its dividend decline 1.5% per annum on average over the past 10 years, which is not great to see.

The Bottom Line

Is TTK Healthcare an attractive dividend stock, or better left on the shelf? It's definitely not great to see earnings per share shrinking. The company paid out an acceptable percentage of its income, but an uncomfortably high percentage of its cash flow over the past year. It's not that we think TTK Healthcare is a bad company, but these characteristics don't generally lead to outstanding dividend performance.

Although, if you're still interested in TTK Healthcare and want to know more, you'll find it very useful to know what risks this stock faces. To help with this, we've discovered 4 warning signs for TTK Healthcare (1 is a bit unpleasant!) that you ought to be aware of before buying the shares.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

If you decide to trade TTK Healthcare, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.