Here's What We Like About Windsor Machines' (NSE:WINDMACHIN) Upcoming Dividend

Windsor Machines Limited (NSE:WINDMACHIN) is about to trade ex-dividend in the next 3 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. 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. Accordingly, Windsor Machines investors that purchase the stock on or after the 15th of September will not receive the dividend, which will be paid on the 23rd of October.

The company's next dividend payment will be ₹1.00 per share. Last year, in total, the company distributed ₹1.00 to shareholders. Calculating the last year's worth of payments shows that Windsor Machines has a trailing yield of 3.4% on the current share price of ₹29.7. 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.

View our latest analysis for Windsor Machines

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Windsor Machines paid out 53% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether Windsor Machines generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 0.06% of its cash flow last year.

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 Windsor Machines paid out over the last 12 months.

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 earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Windsor Machines has grown its earnings rapidly, up 30% a year for the past five years. Management appears to be striking a nice balance between reinvesting for growth and paying dividends to shareholders. Earnings per share have been growing quickly and in combination with some reinvestment and a middling payout ratio, the stock may have decent dividend prospects going forwards.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, four years ago, Windsor Machines has lifted its dividend by approximately 7.5% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

The Bottom Line

Has Windsor Machines got what it takes to maintain its dividend payments? Windsor Machines's growing earnings per share and conservative payout ratios make for a decent combination. We also like that it paid out a lower percentage of its cash flow. There's a lot to like about Windsor Machines, and we would prioritise taking a closer look at it.

While it's tempting to invest in Windsor Machines for the dividends alone, you should always be mindful of the risks involved. For example - Windsor Machines has 3 warning signs we think you should be aware of.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

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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.
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