Only Three Days Left To Cash In On Uniparts India's (NSE:UNIPARTS) Dividend

Readers hoping to buy Uniparts India Limited (NSE:UNIPARTS) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. Meaning, you will need to purchase Uniparts India's shares before the 21st of August to receive the dividend, which will be paid on the 7th of September.

The company's upcoming dividend is ₹6.75 a share, following on from the last 12 months, when the company distributed a total of ₹20.75 per share to shareholders. Calculating the last year's worth of payments shows that Uniparts India has a trailing yield of 4.4% on the current share price of ₹475.90. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Uniparts India

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. Uniparts India is paying out an acceptable 74% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether Uniparts India generated enough free cash flow to afford its dividend. It paid out more than half (55%) 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.

Click here to see how much of its profit Uniparts India 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 fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Uniparts India's earnings per share have been growing at 10% a year for the past five years. Uniparts India has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. This is a reasonable combination that could hint at some further dividend increases in the future.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Uniparts India has delivered an average of 12% per year annual increase in its dividend, based on the past two years of dividend payments. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

Final Takeaway

Has Uniparts India got what it takes to maintain its dividend payments? Higher earnings per share generally lead to higher dividends from dividend-paying stocks over the long run. That's why we're glad to see Uniparts India's earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow - 74% and 55% respectively. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Uniparts India's dividend merits.

So while Uniparts India looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Every company has risks, and we've spotted 1 warning sign for Uniparts India you should know about.

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.