Only Three Days Left To Cash In On Avadh Sugar & Energy's (NSE:AVADHSUGAR) Dividend

Readers hoping to buy Avadh Sugar & Energy Limited (NSE:AVADHSUGAR) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. You will need to purchase shares before the 11th of September to receive the dividend, which will be paid on the 21st of October.

Avadh Sugar & Energy's next dividend payment will be ₹4.00 per share. Last year, in total, the company distributed ₹4.00 to shareholders. Based on the last year's worth of payments, Avadh Sugar & Energy has a trailing yield of 2.1% on the current stock price of ₹191.25. 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.

View our latest analysis for Avadh Sugar & Energy

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. Avadh Sugar & Energy has a low and conservative payout ratio of just 11% of its income after tax. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. The good news is it paid out just 9.3% of its free cash flow in the 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.

Click here to see how much of its profit Avadh Sugar & Energy 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Avadh Sugar & Energy's earnings per share have plummeted approximately 32% a year over the previous five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last two years, Avadh Sugar & Energy has lifted its dividend by approximately 183% a year on average.

The Bottom Line

Is Avadh Sugar & Energy worth buying for its dividend? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. In summary, while it has some positive characteristics, we're not inclined to race out and buy Avadh Sugar & Energy today.

While it's tempting to invest in Avadh Sugar & Energy for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 5 warning signs for Avadh Sugar & Energy that we strongly recommend you have a look at before investing in the company.

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.

If you decide to trade Avadh Sugar & Energy, 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.