It looks like Jash Engineering Limited (NSE:JASH) is about to go ex-dividend in the next three days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. Therefore, if you purchase Jash Engineering's shares on or after the 8th of September, you won't be eligible to receive the dividend, when it is paid on the 16th of October.
The company's upcoming dividend is ₹3.20 a share, following on from the last 12 months, when the company distributed a total of ₹3.20 per share to shareholders. Looking at the last 12 months of distributions, Jash Engineering has a trailing yield of approximately 0.7% on its current stock price of ₹479.15. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.
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. Jash Engineering paid out just 12% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. What's good is that dividends were well covered by free cash flow, with the company paying out 4.1% of its cash flow 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.
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Jash Engineering has grown its earnings rapidly, up 28% a year for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, Jash Engineering looks like a promising growth company.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, three years ago, Jash Engineering has lifted its dividend by approximately 47% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
To Sum It Up
Should investors buy Jash Engineering for the upcoming dividend? Jash Engineering has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past three years, but the conservative payout ratio makes the current dividend look sustainable. There's a lot to like about Jash Engineering, and we would prioritise taking a closer look at it.
So while Jash Engineering looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example, we've found 4 warning signs for Jash Engineering that we recommend you consider before investing in the business.
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. 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.
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