R.P.P. Infra Projects (NSE:RPPINFRA) Could Be A Buy For Its Upcoming Dividend

Readers hoping to buy R.P.P. Infra Projects Limited (NSE:RPPINFRA) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase R.P.P. Infra Projects' shares on or after the 23rd of September, you won't be eligible to receive the dividend, when it is paid on the 30th of October.

The company's next dividend payment will be ₹0.50 per share, on the back of last year when the company paid a total of ₹0.50 to shareholders. Calculating the last year's worth of payments shows that R.P.P. Infra Projects has a trailing yield of 0.3% on the current share price of ₹145.21. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. R.P.P. Infra Projects has a low and conservative payout ratio of just 3.4% of its income after tax. R.P.P. Infra Projects paid a dividend despite reporting negative free cash flow over the last twelve months. This may be due to heavy investment in the business, but this is still suboptimal from a dividend sustainability perspective.

See our latest analysis for R.P.P. Infra Projects

Click here to see how much of its profit R.P.P. Infra Projects 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see R.P.P. Infra Projects earnings per share are up 8.4% per annum over the last five years.

We'd also point out that R.P.P. Infra Projects issued a meaningful number of new shares in the past year. It's hard to grow dividends per share when a company keeps creating new shares.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. It looks like the R.P.P. Infra Projects dividends are largely the same as they were 10 years ago.

The Bottom Line

From a dividend perspective, should investors buy or avoid R.P.P. Infra Projects? R.P.P. Infra Projects has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. We think this is a pretty attractive combination, and would be interested in investigating R.P.P. Infra Projects more closely.

While it's tempting to invest in R.P.P. Infra Projects for the dividends alone, you should always be mindful of the risks involved. Be aware that R.P.P. Infra Projects is showing 4 warning signs in our investment analysis, and 2 of those are concerning...

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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.