Should You Buy Goldiam International Limited (NSE:GOLDIAM) For Its Upcoming Dividend?

Goldiam International Limited (NSE:GOLDIAM) is about to trade ex-dividend in the next three days. This means that investors who purchase shares on or after the 22nd of February will not receive the dividend, which will be paid on the 13th of March.

Goldiam International's next dividend payment will be ₹2.00 per share, and in the last 12 months, the company paid a total of ₹7.50 per share. Calculating the last year's worth of payments shows that Goldiam International has a trailing yield of 2.3% on the current share price of ₹331.15. If you buy this business for its dividend, you should have an idea of whether Goldiam International's dividend is reliable and sustainable. So we need to investigate whether Goldiam International can afford its dividend, and if the dividend could grow.

View our latest analysis for Goldiam International

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Goldiam International is paying out just 23% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. 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 19% of its cash flow last 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 how much of its profit Goldiam International paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see Goldiam International's earnings have been skyrocketing, up 27% per annum for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, Goldiam International looks like a promising growth company.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Goldiam International has delivered an average of 22% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

The Bottom Line

Is Goldiam International an attractive dividend stock, or better left on the shelf? It's great that Goldiam International is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. There's a lot to like about Goldiam International, and we would prioritise taking a closer look at it.

So while Goldiam International looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Our analysis shows 4 warning signs for Goldiam International and you should be aware of these before buying any shares.

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.

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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.
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