Should You Buy ESAB India Limited (NSE:ESABINDIA) 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 ESAB India Limited (NSE:ESABINDIA) is about to trade ex-dividend in the next 3 days. You will need to purchase shares before the 17th of February to receive the dividend, which will be paid on the 10th of March.

ESAB India's upcoming dividend is ₹19.00 a share, following on from the last 12 months, when the company distributed a total of ₹19.00 per share to shareholders. Based on the last year's worth of payments, ESAB India stock has a trailing yield of around 1.0% on the current share price of ₹1864.4. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for ESAB India

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. ESAB India paid out 51% of its earnings to investors last year, a normal payout level for most businesses.

Click here to see how much of its profit ESAB India 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see ESAB India's earnings have been skyrocketing, up 31% per annum for the past five years. The current payout ratio suggests a good balance between rewarding shareholders with dividends, and reinvesting in growth. With a reasonable payout ratio, profits being reinvested, and some earnings growth, ESAB India could have strong prospects for future increases to the dividend.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. ESAB India's dividend payments per share have declined at 0.5% per year on average over the past 10 years, which is uninspiring.

To Sum It Up

Is ESAB India worth buying for its dividend? Earnings per share are growing at an attractive rate, and ESAB India is paying out a bit over half its profits. Overall, ESAB India looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

While it's tempting to invest in ESAB India for the dividends alone, you should always be mindful of the risks involved. In terms of investment risks, we've identified 2 warning signs with ESAB India and understanding them should be part of your investment process.

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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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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