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It looks like Edelweiss Financial Services Limited (NSE:EDELWEISS) is about to go ex-dividend in the next 3 days. Investors can purchase shares before the 17th of July in order to be eligible for this dividend, which will be paid on the 31st of July.
Edelweiss Financial Services’s next dividend payment will be ₹0.30 per share, and in the last 12 months, the company paid a total of ₹1.40 per share. Calculating the last year’s worth of payments shows that Edelweiss Financial Services has a trailing yield of 0.8% on the current share price of ₹173.05. If you buy this business for its dividend, you should have an idea of whether Edelweiss Financial Services’s dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. Edelweiss Financial Services paid out just 12% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.
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.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. That’s why it’s comforting to see Edelweiss Financial Services’s earnings have been skyrocketing, up 31% per annum for the past five years.
Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Edelweiss Financial Services has lifted its dividend by approximately 17% a year on average. It’s exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
The Bottom Line
Is Edelweiss Financial Services worth buying for its dividend? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. Overall, Edelweiss Financial Services looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
Wondering what the future holds for Edelweiss Financial Services? See what the six analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.