Thomas Cook (India) Limited (NSE:THOMASCOOK) Looks Interesting, And It's About To Pay A Dividend

Thomas Cook (India) Limited (NSE:THOMASCOOK) stock is about to trade ex-dividend in day or so. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. 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. Accordingly, Thomas Cook (India) investors that purchase the stock on or after the 16th of August will not receive the dividend, which will be paid on the 29th of September.

The company's next dividend payment will be ₹0.60 per share. Last year, in total, the company distributed ₹0.40 to shareholders. Looking at the last 12 months of distributions, Thomas Cook (India) has a trailing yield of approximately 0.2% on its current stock price of ₹202.65. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Thomas Cook (India) can afford its dividend, and if the dividend could grow.

See our latest analysis for Thomas Cook (India)

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Thomas Cook (India) is paying out just 7.2% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. The good news is it paid out just 2.9% of its free cash flow in the 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 the company's payout ratio, plus analyst estimates of its future dividends.

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. For this reason, we're glad to see Thomas Cook (India)'s earnings per share have risen 20% per annum over the last five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Thomas Cook (India) has lifted its dividend by approximately 0.6% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Thomas Cook (India) is keeping back more of its profits to grow the business.

To Sum It Up

Has Thomas Cook (India) got what it takes to maintain its dividend payments? Thomas Cook (India) has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. Thomas Cook (India) looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Our analysis shows 1 warning sign for Thomas Cook (India) and you should be aware of it before buying any 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.