Be Sure To Check Out Dolat Algotech Limited (NSE:DOLATALGO) Before It Goes Ex-Dividend

Dolat Algotech Limited (NSE:DOLATALGO) stock is about to trade ex-dividend in 3 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Meaning, you will need to purchase Dolat Algotech's shares before the 26th of November to receive the dividend, which will be paid on the 11th of December.

The company's upcoming dividend is ₹0.25 a share, following on from the last 12 months, when the company distributed a total of ₹0.20 per share to shareholders. Last year's total dividend payments show that Dolat Algotech has a trailing yield of 0.3% on the current share price of ₹124.78. If you buy this business for its dividend, you should have an idea of whether Dolat Algotech's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Dolat Algotech

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. Dolat Algotech is paying out just 2.5% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.

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 how much of its profit Dolat Algotech 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 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 Dolat Algotech has grown its earnings rapidly, up 37% a year for the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Dolat Algotech has delivered an average of 9.8% per year annual increase in its dividend, based on the past six years of dividend payments. 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

Has Dolat Algotech got what it takes to maintain its dividend payments? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. Overall, Dolat Algotech looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

While it's tempting to invest in Dolat Algotech for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 2 warning signs for Dolat Algotech that we strongly recommend you have a look at before investing in the company.

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.