Shriram Pistons & Rings Limited (NSE:SHRIPISTON) Stock Goes Ex-Dividend In Just One Day

Readers hoping to buy Shriram Pistons & Rings Limited (NSE:SHRIPISTON) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. You can purchase shares before the 4th of February in order to receive the dividend, which the company will pay on the 27th of February.

Shriram Pistons & Rings's next dividend payment will be ₹6.00 per share, and in the last 12 months, the company paid a total of ₹6.00 per share. Last year's total dividend payments show that Shriram Pistons & Rings has a trailing yield of 0.9% on the current share price of ₹687.45. 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.

See our latest analysis for Shriram Pistons & Rings

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. Shriram Pistons & Rings paid out a comfortable 41% of its profit last year. A useful secondary check can be to evaluate whether Shriram Pistons & Rings generated enough free cash flow to afford its dividend. It paid out 76% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.

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 Shriram Pistons & Rings paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's not ideal to see Shriram Pistons & Rings's earnings per share have been shrinking at 3.2% a year over the previous five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Shriram Pistons & Rings's dividend payments per share have declined at 6.9% per year on average over the past four years, which is uninspiring. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.

The Bottom Line

Should investors buy Shriram Pistons & Rings for the upcoming dividend? Earnings per share have fallen significantly, although at least Shriram Pistons & Rings paid out less than half of its profits and free cash flow over the last year, leaving some margin of safety. All things considered, we are not particularly enthused about Shriram Pistons & Rings from a dividend perspective.

So if you want to do more digging on Shriram Pistons & Rings, you'll find it worthwhile knowing the risks that this stock faces. For example, we've found 3 warning signs for Shriram Pistons & Rings (1 is a bit concerning!) that deserve your attention before investing in the shares.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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