Should Income Investors Look At CRISIL Limited (NSE:CRISIL) Before Its Ex-Dividend?

By
Simply Wall St
Published
July 29, 2021
NSEI:CRISIL
Source: Shutterstock

CRISIL Limited (NSE:CRISIL) 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 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. Therefore, if you purchase CRISIL's shares on or after the 3rd of August, you won't be eligible to receive the dividend, when it is paid on the 18th of August.

The company's next dividend payment will be ₹8.00 per share. Last year, in total, the company distributed ₹34.00 to shareholders. Looking at the last 12 months of distributions, CRISIL has a trailing yield of approximately 1.2% on its current stock price of ₹2831.35. 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 CRISIL can afford its dividend, and if the dividend could grow.

View our latest analysis for CRISIL

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. CRISIL paid out 68% of its earnings to investors last year, a normal payout level for most businesses.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
NSEI:CRISIL Historic Dividend July 30th 2021

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. With that in mind, we're encouraged by the steady growth at CRISIL, with earnings per share up 5.8% on average over the last five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, CRISIL has lifted its dividend by approximately 13% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

Final Takeaway

Is CRISIL an attractive dividend stock, or better left on the shelf? CRISIL has been generating some growth in earnings per share while paying out more than half of its earnings to shareholders in the form of dividends. We're unconvinced on the company's merits, and think there might be better opportunities out there.

With that being said, if dividends aren't your biggest concern with CRISIL, you should know about the other risks facing this business. In terms of investment risks, we've identified 2 warning signs with CRISIL and understanding them should be part of your investment process.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising 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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