Supreme Petrochem Limited (NSE:SUPPETRO) Stock Goes Ex-Dividend In Just Three Days

Supreme Petrochem Limited (NSE:SUPPETRO) stock is about to trade ex-dividend in three days. This means that investors who purchase shares on or after the 5th of November will not receive the dividend, which will be paid on the 22nd of November.

Supreme Petrochem's next dividend payment will be ₹2.50 per share, and in the last 12 months, the company paid a total of ₹2.50 per share. Looking at the last 12 months of distributions, Supreme Petrochem has a trailing yield of approximately 1.0% on its current stock price of ₹258. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Supreme Petrochem can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Supreme Petrochem

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Supreme Petrochem paying out a modest 38% of its earnings. 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. Luckily it paid out just 8.6% of its free cash flow last year.

It's positive to see that Supreme Petrochem's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see how much of its profit Supreme Petrochem 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. So we're not too excited that Supreme Petrochem's earnings are down 3.0% a year over the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Supreme Petrochem has delivered 3.3% dividend growth per year on average over the past 10 years.

The Bottom Line

Is Supreme Petrochem 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. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

On that note, you'll want to research what risks Supreme Petrochem is facing. For example, Supreme Petrochem has 3 warning signs (and 1 which shouldn't be ignored) we think you should know about.

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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