Wendt (India) Limited (NSE:WENDT) Looks Interesting, And It's About To Pay A Dividend

Readers hoping to buy Wendt (India) Limited (NSE:WENDT) 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 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 Wendt (India)'s shares before the 1st of February to receive the dividend, which will be paid on the 16th of February.

The company's upcoming dividend is ₹30.00 a share, following on from the last 12 months, when the company distributed a total of ₹80.00 per share to shareholders. Calculating the last year's worth of payments shows that Wendt (India) has a trailing yield of 0.6% on the current share price of ₹12713.80. If you buy this business for its dividend, you should have an idea of whether Wendt (India)'s dividend is reliable and sustainable. So we need to investigate whether Wendt (India) can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Wendt (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. That's why it's good to see Wendt (India) paying out a modest 40% of its earnings. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Over the last year, it paid out more than three-quarters (82%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.

It's positive to see that Wendt (India)'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 Wendt (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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see Wendt (India)'s earnings have been skyrocketing, up 25% per annum for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Wendt (India) has delivered 18% dividend growth per year on average over the past 10 years. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

To Sum It Up

Has Wendt (India) got what it takes to maintain its dividend payments? Earnings per share have grown at a nice rate in recent times and over the last year, Wendt (India) paid out less than half its earnings and a bit over half its free cash flow. It's a promising combination that should mark this company worthy of closer attention.

While it's tempting to invest in Wendt (India) for the dividends alone, you should always be mindful of the risks involved. For example - Wendt (India) has 1 warning sign we think you should be aware of.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.