Here's What We Like About IndiaMART InterMESH's (NSE:INDIAMART) Upcoming Dividend

IndiaMART InterMESH Limited (NSE:INDIAMART) stock is about to trade ex-dividend in three days. The ex-dividend date generally occurs two days 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. Meaning, you will need to purchase IndiaMART InterMESH's shares before the 6th of June to receive the dividend, which will be paid on the 16th of July.

The company's next dividend payment will be ₹50.00 per share. Last year, in total, the company distributed ₹30.00 to shareholders. Calculating the last year's worth of payments shows that IndiaMART InterMESH has a trailing yield of 1.3% on the current share price of ₹2332.50. If you buy this business for its dividend, you should have an idea of whether IndiaMART InterMESH's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

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Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Fortunately IndiaMART InterMESH's payout ratio is modest, at just 33% of profit. A useful secondary check can be to evaluate whether IndiaMART InterMESH generated enough free cash flow to afford its dividend. The good news is it paid out just 19% 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.

View our latest analysis for IndiaMART InterMESH

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see IndiaMART InterMESH has grown its earnings rapidly, up 29% a year for the past five years. IndiaMART InterMESH is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past five years, IndiaMART InterMESH has increased its dividend at approximately 43% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

The Bottom Line

Is IndiaMART InterMESH worth buying for its dividend? IndiaMART InterMESH has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past five years, but the conservative payout ratio makes the current dividend look sustainable. There's a lot to like about IndiaMART InterMESH, and we would prioritise taking a closer look at it.

While it's tempting to invest in IndiaMART InterMESH for the dividends alone, you should always be mindful of the risks involved. To help with this, we've discovered 2 warning signs for IndiaMART InterMESH that you should be aware of before investing in their 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.