Should Income Investors Look At Vaibhav Global Limited (NSE:VAIBHAVGBL) Before Its Ex-Dividend?

Vaibhav Global Limited (NSE:VAIBHAVGBL) stock is about to trade ex-dividend in 3 days. The ex-dividend date is commonly two business days 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 of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Thus, you can purchase Vaibhav Global's shares before the 6th of November in order to receive the dividend, which the company will pay on the 28th of November.

The company's next dividend payment will be ₹1.50 per share. Last year, in total, the company distributed ₹6.00 to shareholders. Based on the last year's worth of payments, Vaibhav Global stock has a trailing yield of around 2.2% on the current share price of ₹269.17. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

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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. Vaibhav Global paid out a comfortable 27% of its profit last year. A useful secondary check can be to evaluate whether Vaibhav Global generated enough free cash flow to afford its dividend. Over the last year it paid out 57% of its free cash flow as dividends, within the usual range for most companies.

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.

Check out our latest analysis for Vaibhav Global

Click here to see how much of its profit Vaibhav Global paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're not enthused to see that Vaibhav Global's earnings per share have remained effectively flat over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.

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, Vaibhav Global has increased its dividend at approximately 18% a year on average.

To Sum It Up

Is Vaibhav Global worth buying for its dividend? Earnings per share are down very slightly in recent times, and Vaibhav Global paid out less half its profit and more than half its cash flow as dividends, which is not the worst combination but could be better. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.

However if you're still interested in Vaibhav Global as a potential investment, you should definitely consider some of the risks involved with Vaibhav Global. Be aware that Vaibhav Global is showing 2 warning signs in our investment analysis, and 1 of those is a bit unpleasant...

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.