It Might Not Be A Great Idea To Buy Nahar Capital and Financial Services Limited (NSE:NAHARCAP) For Its Next Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Nahar Capital and Financial Services Limited (NSE:NAHARCAP) is about to trade ex-dividend in the next three days. Investors can purchase shares before the 17th of September in order to be eligible for this dividend, which will be paid on the 29th of October.

Nahar Capital and Financial Services's next dividend payment will be ₹0.50 per share, on the back of last year when the company paid a total of ₹0.50 to shareholders. Looking at the last 12 months of distributions, Nahar Capital and Financial Services has a trailing yield of approximately 0.8% on its current stock price of ₹65. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Nahar Capital and Financial Services has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Nahar Capital and Financial Services

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Nahar Capital and Financial Services is paying out an acceptable 72% of its profit, a common payout level among most companies.

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 Nahar Capital and Financial Services paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Nahar Capital and Financial Services's earnings per share have plummeted approximately 43% a year over the previous five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Nahar Capital and Financial Services's dividend payments per share have declined at 10% per year on average over the past 10 years, which is uninspiring. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

The Bottom Line

Is Nahar Capital and Financial Services an attractive dividend stock, or better left on the shelf? We're not overly enthused to see Nahar Capital and Financial Services's earnings in retreat at the same time as the company is paying out more than half of its earnings as dividends to shareholders. All things considered, we're not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.

With that being said, if you're still considering Nahar Capital and Financial Services as an investment, you'll find it beneficial to know what risks this stock is facing. Our analysis shows 5 warning signs for Nahar Capital and Financial Services that we strongly recommend you have a look at before investing in the company.

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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