Alicon Castalloy Limited (NSE:ALICON) Passed Our Checks, And It's About To Pay A ₹4.50 Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Alicon Castalloy Limited (NSE:ALICON) is about to go ex-dividend in just three days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Thus, you can purchase Alicon Castalloy's shares before the 19th of September in order to receive the dividend, which the company will pay on the 27th of October.

The company's next dividend payment will be ₹4.50 per share, and in the last 12 months, the company paid a total of ₹7.50 per share. Last year's total dividend payments show that Alicon Castalloy has a trailing yield of 0.5% on the current share price of ₹1485.70. If you buy this business for its dividend, you should have an idea of whether Alicon Castalloy's dividend is reliable and sustainable. So we need to investigate whether Alicon Castalloy can afford its dividend, and if the dividend could grow.

See our latest analysis for Alicon Castalloy

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Alicon Castalloy paid out just 20% 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 Alicon Castalloy generated enough free cash flow to afford its dividend. Luckily it paid out just 21% of its free cash flow 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 Alicon Castalloy 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. 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 encouraged by the steady growth at Alicon Castalloy, with earnings per share up 2.1% on average over the last five years. Alicon Castalloy is retaining more than three-quarters of its earnings and has a history of generating some growth in earnings. We think this is a reasonable combination.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Alicon Castalloy has delivered an average of 14% per year annual increase in its dividend, based on the past 10 years of dividend payments. 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.

The Bottom Line

Is Alicon Castalloy an attractive dividend stock, or better left on the shelf? Earnings per share growth has been growing somewhat, and Alicon Castalloy is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. It might be nice to see earnings growing faster, but Alicon Castalloy is being conservative with its dividend payouts and could still perform reasonably over the long run. There's a lot to like about Alicon Castalloy, and we would prioritise taking a closer look at it.

In light of that, while Alicon Castalloy has an appealing dividend, it's worth knowing the risks involved with this stock. In terms of investment risks, we've identified 3 warning signs with Alicon Castalloy and understanding them should be part of your investment process.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.