There's A Lot To Like About Om Infra's (NSE:OMINFRAL) Upcoming ₹0.50 Dividend

It looks like Om Infra Limited (NSE:OMINFRAL) is about to go ex-dividend in the next four 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Therefore, if you purchase Om Infra's shares on or after the 20th of September, you won't be eligible to receive the dividend, when it is paid on the 29th of October.

The company's upcoming dividend is ₹0.50 a share, following on from the last 12 months, when the company distributed a total of ₹0.50 per share to shareholders. Calculating the last year's worth of payments shows that Om Infra has a trailing yield of 0.3% on the current share price of ₹180.09. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Om Infra

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. Om Infra has a low and conservative payout ratio of just 10% of its income after tax. 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. The good news is it paid out just 11% of its free cash flow in the last year.

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

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 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 Om Infra has grown its earnings rapidly, up 22% 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, Om Infra looks like a promising growth company.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Om Infra has lifted its dividend by approximately 17% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

To Sum It Up

Is Om Infra worth buying for its dividend? It's great that Om Infra is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. Overall we think this is an attractive combination and worthy of further research.

So while Om Infra looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Our analysis shows 2 warning signs for Om Infra and you should be aware of them before buying any 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.