Just Two Days Till NRB Bearings Limited (NSE:NRBBEARING) Will Be Trading Ex-Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see NRB Bearings Limited (NSE:NRBBEARING) is about to trade ex-dividend in the next two days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled 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. This means that investors who purchase NRB Bearings' shares on or after the 31st of October will not receive the dividend, which will be paid on the 1st of January.

The company's next dividend payment will be ₹2.50 per share, and in the last 12 months, the company paid a total of ₹8.60 per share. Based on the last year's worth of payments, NRB Bearings has a trailing yield of 3.2% on the current stock price of ₹264.95. If you buy this business for its dividend, you should have an idea of whether NRB Bearings'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 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. Its dividend payout ratio is 83% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. We'd be worried about the risk of a drop in earnings. A useful secondary check can be to evaluate whether NRB Bearings generated enough free cash flow to afford its dividend. It paid out more than half (66%) of its free cash flow in the past year, which is within an average range for most companies.

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.

See our latest analysis for NRB Bearings

Click here to see how much of its profit NRB Bearings 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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see NRB Bearings has grown its earnings rapidly, up 22% a year for the past five years. Earnings per share are growing at a rapid rate, yet the company is paying out more than three-quarters of its earnings.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, NRB Bearings has lifted its dividend by approximately 19% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

To Sum It Up

Has NRB Bearings got what it takes to maintain its dividend payments? It's good to see earnings are growing, since all of the best dividend stocks grow their earnings meaningfully over the long run. However, we'd also note that NRB Bearings is paying out more than half of its earnings and cash flow as profits, which could limit the dividend growth if earnings growth slows. All things considered, we are not particularly enthused about NRB Bearings from a dividend perspective.

On that note, you'll want to research what risks NRB Bearings is facing. To help with this, we've discovered 3 warning signs for NRB Bearings that you should be aware of before investing in their shares.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.