Lambodhara Textiles Limited (NSE:LAMBODHARA) Looks Interesting, And It's About To Pay A Dividend

Simply Wall St
August 27, 2021
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It looks like Lambodhara Textiles Limited (NSE:LAMBODHARA) is about to go ex-dividend in the next 3 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. In other words, investors can purchase Lambodhara Textiles' shares before the 1st of September in order to be eligible for the dividend, which will be paid on the 9th of October.

The company's next dividend payment will be ₹1.00 per share, and in the last 12 months, the company paid a total of ₹1.00 per share. Looking at the last 12 months of distributions, Lambodhara Textiles has a trailing yield of approximately 1.3% on its current stock price of ₹80.1. If you buy this business for its dividend, you should have an idea of whether Lambodhara Textiles's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Lambodhara Textiles

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. Lambodhara Textiles has a low and conservative payout ratio of just 6.9% of its income after tax. A useful secondary check can be to evaluate whether Lambodhara Textiles generated enough free cash flow to afford its dividend. It paid out 3.6% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that Lambodhara Textiles'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 Lambodhara Textiles paid out over the last 12 months.

NSEI:LAMBODHARA Historic Dividend August 28th 2021

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 earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Lambodhara Textiles's earnings have been skyrocketing, up 24% 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, Lambodhara Textiles looks like a promising growth company.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Lambodhara Textiles has increased its dividend at approximately 6.4% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

To Sum It Up

From a dividend perspective, should investors buy or avoid Lambodhara Textiles? It's great that Lambodhara Textiles 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 Lambodhara Textiles, and we would prioritise taking a closer look at it.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. To help with this, we've discovered 5 warning signs for Lambodhara Textiles that you should be aware of before investing in their 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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