Three Days Left To Buy Bata India Limited (NSE:BATAINDIA) Before The Ex-Dividend Date

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Bata India Limited (NSE:BATAINDIA) is about to trade ex-dividend in the next three days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible 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. Accordingly, Bata India investors that purchase the stock on or after the 16th of August will not receive the dividend, which will be paid on the 5th of September.

The company's next dividend payment will be ₹10.00 per share, and in the last 12 months, the company paid a total of ₹12.00 per share. Looking at the last 12 months of distributions, Bata India has a trailing yield of approximately 1.4% on its current stock price of ₹1443.00. 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! So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Bata India

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Bata India paid out 59% of its earnings to investors last year, a normal payout level for most businesses. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Fortunately, it paid out only 49% of its free cash flow in the past 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 the company's payout ratio, plus analyst estimates of its future dividends.

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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're not enthused to see that Bata India's earnings per share have remained effectively flat over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share. Earnings per share growth has been slim, and the company is already paying out a majority of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Bata India has lifted its dividend by approximately 20% a year on average.

To Sum It Up

From a dividend perspective, should investors buy or avoid Bata India? It's unfortunate that earnings per share have not grown, and we'd note that Bata India is paying out lower percentage of its cashflow than its profit, but overall the dividend looks well covered by earnings. In summary, it's hard to get excited about Bata India from a dividend perspective.

While it's tempting to invest in Bata India for the dividends alone, you should always be mindful of the risks involved. Case in point: We've spotted 3 warning signs for Bata India you should be aware of.

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.