Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Angel Broking Limited (NSE:ANGELBRKG) is about to trade ex-dividend in the next three days. Investors can purchase shares before the 29th of April in order to be eligible for this dividend, which will be paid on the 21st of May.
The upcoming dividend for Angel Broking will put a total of ₹7.50 per share in shareholders' pockets. 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! So we need to investigate whether Angel Broking can afford its dividend, and if the dividend could grow.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Angel Broking paid out just 6.0% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
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. It's encouraging to see Angel Broking has grown its earnings rapidly, up 38% a year for the past five years.
We'd also point out that Angel Broking issued a meaningful number of new shares in the past year. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.
This is Angel Broking's first year of paying a dividend, so it doesn't have much of a history yet to compare to.
Is Angel Broking worth buying for its dividend? Companies like Angel Broking that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. In summary, Angel Broking appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
On that note, you'll want to research what risks Angel Broking is facing. Every company has risks, and we've spotted 2 warning signs for Angel Broking you should know about.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
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This article by Simply Wall St is general in nature. 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.
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