Should Income Investors Look At Apollo Sindoori Hotels Limited (NSE:APOLSINHOT) Before Its Ex-Dividend?

Apollo Sindoori Hotels Limited (NSE:APOLSINHOT) is about to trade ex-dividend in the next three days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Therefore, if you purchase Apollo Sindoori Hotels' shares on or after the 17th of February, you won't be eligible to receive the dividend, when it is paid on the 9th of March.

The company's next dividend payment will be ₹0.50 per share. Last year, in total, the company distributed ₹2.00 to shareholders. Based on the last year's worth of payments, Apollo Sindoori Hotels stock has a trailing yield of around 0.1% on the current share price of ₹1348.75. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Apollo Sindoori Hotels

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Apollo Sindoori Hotels paid out just 4.7% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether Apollo Sindoori Hotels generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 3.5% of its 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 Apollo Sindoori Hotels paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Apollo Sindoori Hotels's earnings per share have fallen at approximately 19% a year over the previous five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

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, Apollo Sindoori Hotels has increased its dividend at approximately 2.9% a year on average.

To Sum It Up

From a dividend perspective, should investors buy or avoid Apollo Sindoori Hotels? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. In summary, it's hard to get excited about Apollo Sindoori Hotels from a dividend perspective.

In light of that, while Apollo Sindoori Hotels has an appealing dividend, it's worth knowing the risks involved with this stock. Every company has risks, and we've spotted 3 warning signs for Apollo Sindoori Hotels (of which 1 is potentially serious!) you should know about.

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

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.