Is It Smart To Buy Privi Speciality Chemicals Limited (NSE:PRIVISCL) Before It Goes Ex-Dividend?

It looks like Privi Speciality Chemicals Limited (NSE:PRIVISCL) is about to go ex-dividend in the next 3 days. You can purchase shares before the 26th of October in order to receive the dividend, which the company will pay on the 2nd of December.

Privi Speciality Chemicals's next dividend payment will be ₹1.50 per share, on the back of last year when the company paid a total of ₹1.50 to shareholders. Looking at the last 12 months of distributions, Privi Speciality Chemicals has a trailing yield of approximately 0.3% on its current stock price of ₹545. If you buy this business for its dividend, you should have an idea of whether Privi Speciality Chemicals's dividend is reliable and sustainable. As a result, readers should always check whether Privi Speciality Chemicals has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Privi Speciality Chemicals

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Privi Speciality Chemicals paid out just 3.6% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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. It distributed 32% of its free cash flow as dividends, a comfortable payout level for most companies.

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.

Click here to see how much of its profit Privi Speciality Chemicals paid out over the last 12 months.

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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Privi Speciality Chemicals has grown its earnings rapidly, up 33% a year for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Privi Speciality Chemicals has delivered an average of 9.0% per year annual increase in its dividend, based on the past nine years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

To Sum It Up

Is Privi Speciality Chemicals worth buying for its dividend? Privi Speciality Chemicals has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past nine years, but the conservative payout ratio makes the current dividend look sustainable. It's a promising combination that should mark this company worthy of closer attention.

In light of that, while Privi Speciality Chemicals has an appealing dividend, it's worth knowing the risks involved with this stock. For example - Privi Speciality Chemicals has 3 warning signs we think you should be aware of.

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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