Is It Worth Considering Advani Hotels & Resorts (India) Limited (NSE:ADVANIHOTR) For Its Upcoming Dividend?

Advani Hotels & Resorts (India) Limited (NSE:ADVANIHOTR) stock is about to trade ex-dividend in four 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 important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Thus, you can purchase Advani Hotels & Resorts (India)'s shares before the 31st of May in order to receive the dividend, which the company will pay on the 17th of June.

The company's next dividend payment will be ₹0.80 per share, on the back of last year when the company paid a total of ₹1.70 to shareholders. Looking at the last 12 months of distributions, Advani Hotels & Resorts (India) has a trailing yield of approximately 2.2% on its current stock price of ₹75.65. 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 investigate whether Advani Hotels & Resorts (India) can afford its dividend, and if the dividend could grow.

See our latest analysis for Advani Hotels & Resorts (India)

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. Advani Hotels & Resorts (India) is paying out an acceptable 62% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether Advani Hotels & Resorts (India) generated enough free cash flow to afford its dividend. Over the last year it paid out 62% 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.

Click here to see how much of its profit Advani Hotels & Resorts (India) paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, Advani Hotels & Resorts (India)'s earnings per share have been growing at 17% a year for the past five years. Advani Hotels & Resorts (India) has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. This is a reasonable combination that could hint at some 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. In the last 10 years, Advani Hotels & Resorts (India) has lifted its dividend by approximately 29% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

The Bottom Line

From a dividend perspective, should investors buy or avoid Advani Hotels & Resorts (India)? It's good to see earnings are growing, since all of the best dividend stocks grow their earnings meaningfully over the long run. However, we'd also note that Advani Hotels & Resorts (India) is paying out more than half of its earnings and cash flow as profits, which could limit the dividend growth if earnings growth slows. In summary, it's hard to get excited about Advani Hotels & Resorts (India) from a dividend perspective.

While it's tempting to invest in Advani Hotels & Resorts (India) for the dividends alone, you should always be mindful of the risks involved. Case in point: We've spotted 2 warning signs for Advani Hotels & Resorts (India) you should be aware of.

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.