It looks like Steel City Securities Limited (NSE:STEELCITY) is about to go ex-dividend in the next 3 days. You can purchase shares before the 8th of March in order to receive the dividend, which the company will pay on the 27th of March.
Steel City Securities's next dividend payment will be ₹1.00 per share, and in the last 12 months, the company paid a total of ₹2.00 per share. Based on the last year's worth of payments, Steel City Securities stock has a trailing yield of around 5.2% on the current share price of ₹38.5. 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 investigate whether Steel City Securities can afford its dividend, and if the dividend could grow.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That's why it's good to see Steel City Securities paying out a modest 32% of its earnings.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Steel City Securities earnings per share are up 2.4% per annum over the last five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Steel City Securities has seen its dividend decline 7.2% per annum on average over the past three years, which is not great to see. Steel City Securities is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.
The Bottom Line
Is Steel City Securities an attractive dividend stock, or better left on the shelf? Steel City Securities has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. We think this is a pretty attractive combination, and would be interested in investigating Steel City Securities more closely.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For instance, we've identified 2 warning signs for Steel City Securities (1 doesn't sit too well with us) you should be aware of.
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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