Two Days Left To Buy Signet Industries Limited (NSE:SIGIND) Before The Ex-Dividend Date

Readers hoping to buy Signet Industries Limited (NSE:SIGIND) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. If you purchase the stock on or after the 17th of September, you won't be eligible to receive this dividend, when it is paid on the 25th of October.

Signet Industries's next dividend payment will be ₹0.50 per share, on the back of last year when the company paid a total of ₹0.50 to shareholders. Last year's total dividend payments show that Signet Industries has a trailing yield of 2.5% on the current share price of ₹20.35. 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! We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Signet Industries

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Signet Industries paid out just 13% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether Signet Industries generated enough free cash flow to afford its dividend. The good news is it paid out just 19% 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 Signet Industries paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're not enthused to see that Signet Industries's earnings per share have remained effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Signet Industries has seen its dividend decline 9.7% per annum on average over the past nine years, which is not great to see.

Final Takeaway

Is Signet Industries an attractive dividend stock, or better left on the shelf? Earnings per share have been flat, 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 gets cut. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Signet Industries's dividend merits.

In light of that, while Signet Industries has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 5 warning signs for Signet Industries that we strongly recommend you have a look at before investing in the company.

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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