Stock Analysis

Schaeffler India Limited (NSE:SCHAEFFLER) Passed Our Checks, And It's About To Pay A ₹16.00 Dividend

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Schaeffler India Limited (NSE:SCHAEFFLER) is about to trade ex-dividend in the next 3 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 important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Meaning, you will need to purchase Schaeffler India's shares before the 19th of April to receive the dividend, which will be paid on the 27th of May.

The company's next dividend payment will be ₹16.00 per share. Last year, in total, the company distributed ₹16.00 to shareholders. Based on the last year's worth of payments, Schaeffler India stock has a trailing yield of around 0.8% on the current share price of ₹2021.7. If you buy this business for its dividend, you should have an idea of whether Schaeffler India's dividend is reliable and sustainable. As a result, readers should always check whether Schaeffler India has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Schaeffler India

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Schaeffler India paid out a comfortable 40% of its profit last year. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It distributed 42% of its free cash flow as dividends, a comfortable payout level 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.

Click here to see how much of its profit Schaeffler India paid out over the last 12 months.

NSEI:SCHAEFFLER Historic Dividend April 15th 2022

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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see Schaeffler India's earnings per share have risen 11% per annum over the last five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Schaeffler India has delivered an average of 32% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

The Bottom Line

Is Schaeffler India worth buying for its dividend? Schaeffler India has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. There's a lot to like about Schaeffler India, and we would prioritise taking a closer look at it.

Curious about whether Schaeffler India has been able to consistently generate growth? Here's a chart of its historical revenue and earnings growth.

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.

Valuation is complex, but we're helping make it simple.

Find out whether Schaeffler India is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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