Ambika Cotton Mills Limited (NSE:AMBIKCO) Stock Goes Ex-Dividend In Just Three Days

Ambika Cotton Mills Limited (NSE:AMBIKCO) stock is about to trade ex-dividend in three days. If you purchase the stock on or after the 21st of September, you won't be eligible to receive this dividend, when it is paid on the 29th of October.

Ambika Cotton Mills's next dividend payment will be ₹15.00 per share. Last year, in total, the company distributed ₹15.00 to shareholders. Last year's total dividend payments show that Ambika Cotton Mills has a trailing yield of 2.1% on the current share price of ₹709.35. 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.

See our latest analysis for Ambika Cotton Mills

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Ambika Cotton Mills paid out just 20% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether Ambika Cotton Mills generated enough free cash flow to afford its dividend. Over the last year it paid out 56% 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 how much of its profit Ambika Cotton Mills paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. So we're not too excited that Ambika Cotton Mills's earnings are down 2.7% a year over the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Ambika Cotton Mills has lifted its dividend by approximately 17% a year on average.

Final Takeaway

Has Ambika Cotton Mills got what it takes to maintain its dividend payments? Its earnings per share have been declining meaningfully, although it is paying out less than half its income and more than half its cash flow as dividends. Neither payout ratio appears an immediate concern, but we're concerned about the earnings. In summary, it's hard to get excited about Ambika Cotton Mills from a dividend perspective.

So if you want to do more digging on Ambika Cotton Mills, you'll find it worthwhile knowing the risks that this stock faces. Our analysis shows 3 warning signs for Ambika Cotton Mills that we strongly recommend you have a look at before investing in the company.

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.

If you decide to trade Ambika Cotton Mills, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted

This article by Simply Wall St is general in nature. 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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

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