Avadh Sugar & Energy Limited (NSE:AVADHSUGAR) Will Pay A ₹10.00 Dividend In Three Days

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Avadh Sugar & Energy Limited (NSE:AVADHSUGAR) is about to trade ex-dividend in the next three days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Accordingly, Avadh Sugar & Energy investors that purchase the stock on or after the 16th of July will not receive the dividend, which will be paid on the 29th of August.

The company's next dividend payment will be ₹10.00 per share, and in the last 12 months, the company paid a total of ₹10.00 per share. Last year's total dividend payments show that Avadh Sugar & Energy has a trailing yield of 2.0% on the current share price of ₹502.05. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

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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. Avadh Sugar & Energy has a low and conservative payout ratio of just 23% of its income after tax. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It distributed 42% of its free cash flow as dividends, a comfortable payout level for most companies.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

See our latest analysis for Avadh Sugar & Energy

Click here to see how much of its profit Avadh Sugar & Energy paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're not enthused to see that Avadh Sugar & Energy's earnings per share have remained effectively flat over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last seven years, Avadh Sugar & Energy has lifted its dividend by approximately 53% a year on average.

To Sum It Up

Should investors buy Avadh Sugar & Energy for the upcoming dividend? Earnings per share have been flat, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend gets cut. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

So while Avadh Sugar & Energy looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. To help with this, we've discovered 1 warning sign for Avadh Sugar & Energy that you should be aware of before investing in their shares.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.