Sangam (India) Limited (NSE:SANGAMIND) Passed Our Checks, And It's About To Pay A ₹2.00 Dividend

Readers hoping to buy Sangam (India) Limited (NSE:SANGAMIND) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a 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 Sangam (India)'s shares before the 12th of September in order to be eligible for the dividend, which will be paid on the 19th of October.

The company's upcoming dividend is ₹2.00 a share, following on from the last 12 months, when the company distributed a total of ₹2.00 per share to shareholders. Last year's total dividend payments show that Sangam (India) has a trailing yield of 0.5% on the current share price of ₹365.05. 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 Sangam (India) has been able to grow its dividends, or if the dividend might be cut.

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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. That's why it's good to see Sangam (India) paying out a modest 32% of its earnings. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Luckily it paid out just 8.6% 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.

View our latest analysis for Sangam (India)

Click here to see how much of its profit Sangam (India) 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 earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see Sangam (India) earnings per share are up 3.0% per annum over the last five years. Recent growth has not been impressive. Yet there are several ways to grow the dividend, and one of them is simply that the company may choose to pay out more of its earnings as dividends.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Sangam (India)'s dividend payments are broadly unchanged compared to where they were 10 years ago.

To Sum It Up

Is Sangam (India) worth buying for its dividend? Earnings per share have been growing moderately, and Sangam (India) is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. 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 Sangam (India) is halfway there. It's a promising combination that should mark this company worthy of closer attention.

While it's tempting to invest in Sangam (India) for the dividends alone, you should always be mindful of the risks involved. To help with this, we've discovered 4 warning signs for Sangam (India) (1 shouldn't be ignored!) that you ought to be aware of before buying 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.

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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.