Siyaram Silk Mills Limited (NSE:SIYSIL) Passed Our Checks, And It's About To Pay A ₹3.00 Dividend

Siyaram Silk Mills Limited (NSE:SIYSIL) is about to trade ex-dividend in the next three 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Meaning, you will need to purchase Siyaram Silk Mills' shares before the 3rd of February to receive the dividend, which will be paid on the 24th of February.

The company's next dividend payment will be ₹3.00 per share, and in the last 12 months, the company paid a total of ₹11.00 per share. Looking at the last 12 months of distributions, Siyaram Silk Mills has a trailing yield of approximately 1.3% on its current stock price of ₹831.50. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Siyaram Silk Mills has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Siyaram Silk Mills

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. Siyaram Silk Mills paid out a comfortable 26% of its profit last year. A useful secondary check can be to evaluate whether Siyaram Silk Mills generated enough free cash flow to afford its dividend. It paid out more than half (66%) of its free cash flow in the past year, which is within an average range for most companies.

It's positive to see that Siyaram Silk Mills'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 Siyaram Silk Mills 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, Siyaram Silk Mills's earnings per share have been growing at 15% a year for the past five years. Siyaram Silk Mills has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Siyaram Silk Mills has lifted its dividend by approximately 21% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

To Sum It Up

Is Siyaram Silk Mills an attractive dividend stock, or better left on the shelf? From a dividend perspective, we're encouraged to see that earnings per share have been growing, the company is paying out less than half of its earnings, and a bit over half its free cash flow. Siyaram Silk Mills looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

While it's tempting to invest in Siyaram Silk Mills for the dividends alone, you should always be mindful of the risks involved. To help with this, we've discovered 2 warning signs for Siyaram Silk Mills (1 makes us a bit uncomfortable!) that you ought to be aware of before buying the shares.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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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.