Dividend Investors: Don't Be Too Quick To Buy Radiant Cash Management Services Limited (NSE:RADIANTCMS) For Its Upcoming Dividend

Radiant Cash Management Services Limited (NSE:RADIANTCMS) stock is about to trade ex-dividend in 3 days. The ex-dividend date is commonly two business days 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 because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Meaning, you will need to purchase Radiant Cash Management Services' shares before the 2nd of September to receive the dividend, which will be paid on the 9th of October.

The company's upcoming dividend is ₹2.50 a share, following on from the last 12 months, when the company distributed a total of ₹2.50 per share to shareholders. Looking at the last 12 months of distributions, Radiant Cash Management Services has a trailing yield of approximately 4.2% on its current stock price of ₹59.07. If you buy this business for its dividend, you should have an idea of whether Radiant Cash Management Services's dividend is reliable and sustainable. So we need to investigate whether Radiant Cash Management Services can afford its dividend, and if the dividend could grow.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Radiant Cash Management Services paid out more than half (57%) of its earnings last year, which is a regular payout ratio for most companies. 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 paid out more than half (67%) 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.

See our latest analysis for Radiant Cash Management Services

Click here to see how much of its profit Radiant Cash Management Services paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's not encouraging to see that Radiant Cash Management Services's earnings are effectively flat over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past three years, Radiant Cash Management Services has increased its dividend at approximately 7.7% a year on average.

To Sum It Up

From a dividend perspective, should investors buy or avoid Radiant Cash Management Services? While earnings per share are flat, at least Radiant Cash Management Services has not committed itself to an unsustainable dividend, with its earnings and cashflow payout ratios within reasonable bounds. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of Radiant Cash Management Services.

Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with Radiant Cash Management Services. To help with this, we've discovered 2 warning signs for Radiant Cash Management Services that you should be aware of before investing in their 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.