Jay Bharat Maruti Limited (NSE:JAYBARMARU) Goes Ex-Dividend Soon

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Jay Bharat Maruti Limited (NSE:JAYBARMARU) is about to trade ex-dividend in the next 3 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. This means that investors who purchase Jay Bharat Maruti's shares on or after the 5th of September will not receive the dividend, which will be paid on the 12th of October.

The company's next dividend payment will be ₹0.70 per share. Last year, in total, the company distributed ₹0.70 to shareholders. Based on the last year's worth of payments, Jay Bharat Maruti stock has a trailing yield of around 0.7% on the current share price of ₹105.25. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Jay Bharat Maruti

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. Jay Bharat Maruti paid out just 24% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. The good news is it paid out just 18% 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 Jay Bharat Maruti paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. Jay Bharat Maruti's earnings per share have fallen at approximately 9.0% a year over the previous five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Jay Bharat Maruti has increased its dividend at approximately 11% a year on average.

To Sum It Up

From a dividend perspective, should investors buy or avoid Jay Bharat Maruti? Jay Bharat Maruti has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. Overall, it's hard to get excited about Jay Bharat Maruti from a dividend perspective.

While it's tempting to invest in Jay Bharat Maruti for the dividends alone, you should always be mindful of the risks involved. Be aware that Jay Bharat Maruti is showing 2 warning signs in our investment analysis, and 1 of those is a bit unpleasant...

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.