Indian Energy Exchange Limited (NSE:IEX) Passed Our Checks, And It's About To Pay A ₹2.50 Dividend

Indian Energy Exchange Limited (NSE:IEX) is about to trade ex-dividend in the next 3 days. You can purchase shares before the 28th of January in order to receive the dividend, which the company will pay on the 20th of February.

Indian Energy Exchange's next dividend payment will be ₹2.50 per share, on the back of last year when the company paid a total of ₹2.50 to shareholders. Last year's total dividend payments show that Indian Energy Exchange has a trailing yield of 1.1% on the current share price of ₹232.95. 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 check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Indian Energy Exchange

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Indian Energy Exchange paid out a comfortable 39% of its profit last year.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

Click here to see how much of its profit Indian Energy Exchange 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. For this reason, we're glad to see Indian Energy Exchange's earnings per share have risen 17% per annum 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. Indian Energy Exchange has delivered 4.4% dividend growth per year on average over the past three years. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

The Bottom Line

Is Indian Energy Exchange worth buying for its dividend? Companies like Indian Energy Exchange that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their 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. We think this is a pretty attractive combination, and would be interested in investigating Indian Energy Exchange more closely.

While it's tempting to invest in Indian Energy Exchange for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 2 warning signs for Indian Energy Exchange 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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