Here's What We Like About Likhitha Infrastructure's (NSE:LIKHITHA) Upcoming Dividend

Likhitha Infrastructure Limited (NSE:LIKHITHA) is about to trade ex-dividend in the next 3 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible 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. Thus, you can purchase Likhitha Infrastructure's shares before the 17th of September in order to receive the dividend, which the company will pay on the 24th of October.

The company's next dividend payment will be ₹1.50 per share, and in the last 12 months, the company paid a total of ₹1.50 per share. Based on the last year's worth of payments, Likhitha Infrastructure has a trailing yield of 0.4% on the current stock price of ₹406.25. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Likhitha Infrastructure can afford its dividend, and if the dividend could grow.

See our latest analysis for Likhitha Infrastructure

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Likhitha Infrastructure is paying out just 9.0% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. A useful secondary check can be to evaluate whether Likhitha Infrastructure generated enough free cash flow to afford its dividend. It paid out 90% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.

It's positive to see that Likhitha Infrastructure's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see how much of its profit Likhitha Infrastructure paid out over the last 12 months.

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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see Likhitha Infrastructure's earnings have been skyrocketing, up 23% per annum 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. Since the start of our data, three years ago, Likhitha Infrastructure has lifted its dividend by approximately 26% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

To Sum It Up

Should investors buy Likhitha Infrastructure for the upcoming dividend? Earnings per share have grown at a nice rate in recent times and over the last year, Likhitha Infrastructure paid out less than half its earnings and a bit over half its free cash flow. Overall we think this is an attractive combination and worthy of further research.

While it's tempting to invest in Likhitha Infrastructure for the dividends alone, you should always be mindful of the risks involved. For example - Likhitha Infrastructure has 1 warning sign we think you should be aware of.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.