Why You Might Be Interested In Beardsell Limited (NSE:BEARDSELL) For Its Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Beardsell Limited (NSE:BEARDSELL) 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, Beardsell investors that purchase the stock on or after the 23rd of September will not receive the dividend, which will be paid on the 29th of October.

The company's next dividend payment will be ₹0.10 per share. Last year, in total, the company distributed ₹0.10 to shareholders. Looking at the last 12 months of distributions, Beardsell has a trailing yield of approximately 0.2% on its current stock price of ₹44.93. If you buy this business for its dividend, you should have an idea of whether Beardsell's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for Beardsell

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. Beardsell has a low and conservative payout ratio of just 4.8% of its income after tax. A useful secondary check can be to evaluate whether Beardsell generated enough free cash flow to afford its dividend. It paid out 22% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that Beardsell'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 Beardsell paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Beardsell's earnings have been skyrocketing, up 56% per annum for the past five years. Beardsell earnings per share have been sprinting ahead like the Road Runner at a track and field day; scarcely stopping even for a cheeky "beep-beep". We also like that it is reinvesting most of its profits in its business.'

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Beardsell has seen its dividend decline 5.0% per annum on average over the past 10 years, which is not great to see. Beardsell is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

To Sum It Up

Should investors buy Beardsell for the upcoming dividend? Beardsell has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. There's a lot to like about Beardsell, and we would prioritise taking a closer look at it.

In light of that, while Beardsell has an appealing dividend, it's worth knowing the risks involved with this stock. To help with this, we've discovered 3 warning signs for Beardsell (1 makes us a bit uncomfortable!) that you ought to be aware of before buying the shares.

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.