Should You Buy SIL Investments Limited (NSE:SILINV) For Its Upcoming Dividend?

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see SIL Investments Limited (NSE:SILINV) is about to trade ex-dividend in the next 3 days. You can purchase shares before the 14th of September in order to receive the dividend, which the company will pay on the 16th of October.

SIL Investments's next dividend payment will be ₹2.50 per share, on the back of last year when the company paid a total of ₹2.50 to shareholders. Based on the last year's worth of payments, SIL Investments has a trailing yield of 1.8% on the current stock price of ₹136.5. If you buy this business for its dividend, you should have an idea of whether SIL Investments's dividend is reliable and sustainable. So we need to investigate whether SIL Investments can afford its dividend, and if the dividend could grow.

See our latest analysis for SIL Investments

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. SIL Investments is paying out just 8.2% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

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

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see SIL Investments has grown its earnings rapidly, up 21% a year for the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. SIL Investments has delivered 9.6% dividend growth per year on average over the past 10 years. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

Final Takeaway

Has SIL Investments got what it takes to maintain its dividend payments? Companies like SIL Investments that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their 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. Overall, SIL Investments looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

So while SIL Investments looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example, SIL Investments has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about.

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.

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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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