Just Three Days Till Computer Age Management Services Limited (NSE:CAMS) Will Be Trading Ex-Dividend

It looks like Computer Age Management Services Limited (NSE:CAMS) is about to go 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 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. Therefore, if you purchase Computer Age Management Services' shares on or after the 8th of July, you won't be eligible to receive the dividend, when it is paid on the 30th of July.

The company's next dividend payment will be ₹16.50 per share, on the back of last year when the company paid a total of ₹46.50 to shareholders. Based on the last year's worth of payments, Computer Age Management Services stock has a trailing yield of around 1.2% on the current share price of ₹3799.55. If you buy this business for its dividend, you should have an idea of whether Computer Age Management Services's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Computer Age Management Services

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Computer Age Management Services paid out 65% of its earnings to investors last year, a normal payout level for most businesses. 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 57% of its free cash flow as dividends, within the usual 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 the company's payout ratio, plus analyst estimates of its future dividends.

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. It's encouraging to see Computer Age Management Services has grown its earnings rapidly, up 22% a year for the past five years. The current payout ratio suggests a good balance between rewarding shareholders with dividends, and reinvesting in growth. 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.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Computer Age Management Services has delivered an average of 36% per year annual increase in its dividend, based on the past four years of dividend payments. 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

Should investors buy Computer Age Management Services for the upcoming dividend? It's good to see earnings are growing, since all of the best dividend stocks grow their earnings meaningfully over the long run. That's why we're glad to see Computer Age Management Services's earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow - 65% and 57% 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 Computer Age Management Services's dividend merits.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Our analysis shows 2 warning signs for Computer Age Management Services and you should be aware of them before buying any shares.

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.

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com