Banswara Syntex Limited (NSE:BANSWRAS) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

It looks like Banswara Syntex Limited (NSE:BANSWRAS) is about to go ex-dividend in the next three days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Accordingly, Banswara Syntex investors that purchase the stock on or after the 30th of July will not receive the dividend, which will be paid on the 5th of September.

The company's next dividend payment will be ₹1.00 per share, on the back of last year when the company paid a total of ₹1.00 to shareholders. Based on the last year's worth of payments, Banswara Syntex stock has a trailing yield of around 0.6% on the current share price of ₹169.24. 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! As a result, readers should always check whether Banswara Syntex has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Banswara Syntex

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. Banswara Syntex paid out just 9.6% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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. What's good is that dividends were well covered by free cash flow, with the company paying out 23% of its cash flow last year.

It's positive to see that Banswara Syntex'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 Banswara Syntex 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Banswara Syntex, with earnings per share up 7.9% on average over the last five years. Earnings per share have been growing at a decent rate, and the company is retaining more than three-quarters of its earnings in the business. If profits are reinvested effectively, this could be a bullish combination for future earnings and dividends.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Banswara Syntex has increased its dividend at approximately 2.9% 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.

To Sum It Up

From a dividend perspective, should investors buy or avoid Banswara Syntex? Earnings per share growth has been growing somewhat, and Banswara Syntex is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Banswara Syntex is halfway there. Overall we think this is an attractive combination and worthy of further research.

So while Banswara Syntex looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For instance, we've identified 5 warning signs for Banswara Syntex (1 makes us a bit uncomfortable) 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.

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