Only Three Days Left To Cash In On Pashupati Cotspin's (NSE:PASHUPATI) Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Pashupati Cotspin Limited (NSE:PASHUPATI) is about to go ex-dividend in just 3 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. Meaning, you will need to purchase Pashupati Cotspin's shares before the 23rd of September to receive the dividend, which will be paid on the 30th of October.

The company's upcoming dividend is ₹0.75 a share, following on from the last 12 months, when the company distributed a total of ₹0.75 per share to shareholders. Based on the last year's worth of payments, Pashupati Cotspin stock has a trailing yield of around 0.1% on the current share price of ₹530.00. If you buy this business for its dividend, you should have an idea of whether Pashupati Cotspin's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for Pashupati Cotspin

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Pashupati Cotspin has a low and conservative payout ratio of just 11% of its income after tax. 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. Luckily it paid out just 2.6% of its free 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 Pashupati Cotspin paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're discomforted by Pashupati Cotspin's 5.6% per annum decline in earnings in the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Pashupati Cotspin has delivered 8.4% dividend growth per year on average over the past five years.

To Sum It Up

Should investors buy Pashupati Cotspin for the upcoming dividend? Pashupati Cotspin has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. To summarise, Pashupati Cotspin looks okay on this analysis, although it doesn't appear a stand-out opportunity.

In light of that, while Pashupati Cotspin has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 2 warning signs for Pashupati Cotspin (1 doesn't sit too well with us!) that deserve your attention before investing in the shares.

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.

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

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.