Arihant Capital Markets (NSE:ARIHANTCAP) Could Be A Buy For Its Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Arihant Capital Markets Limited (NSE:ARIHANTCAP) is about to trade ex-dividend in the next three days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase Arihant Capital Markets' shares on or after the 19th of September, you won't be eligible to receive the dividend, when it is paid on the 27th of October.

The company's next dividend payment will be ₹0.50 per share, and in the last 12 months, the company paid a total of ₹0.50 per share. Calculating the last year's worth of payments shows that Arihant Capital Markets has a trailing yield of 0.4% on the current share price of ₹113.10. If you buy this business for its dividend, you should have an idea of whether Arihant Capital Markets's dividend is reliable and sustainable. So we need to investigate whether Arihant Capital Markets can afford its dividend, and if the dividend could grow.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Arihant Capital Markets has a low and conservative payout ratio of just 8.9% of its income after tax.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

Check out our latest analysis for Arihant Capital Markets

Click here to see how much of its profit Arihant Capital Markets 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 fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Arihant Capital Markets's earnings have been skyrocketing, up 25% per annum for the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Arihant Capital Markets has delivered an average of 13% per year annual increase in its dividend, based on the past 10 years of dividend payments. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

Final Takeaway

Has Arihant Capital Markets got what it takes to maintain its dividend payments? Companies like Arihant Capital Markets 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. We think this is a pretty attractive combination, and would be interested in investigating Arihant Capital Markets more closely.

While it's tempting to invest in Arihant Capital Markets for the dividends alone, you should always be mindful of the risks involved. Case in point: We've spotted 1 warning sign for Arihant Capital Markets you should be aware of.

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.