Godfrey Phillips India Limited (NSE:GODFRYPHLP) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

By
Simply Wall St
Published
July 23, 2021
NSEI:GODFRYPHLP
Source: Shutterstock

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Godfrey Phillips India Limited (NSE:GODFRYPHLP) is about to go ex-dividend in just three days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled 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. In other words, investors can purchase Godfrey Phillips India's shares before the 28th of July in order to be eligible for the dividend, which will be paid on the 10th of August.

The company's next dividend payment will be ₹24.00 per share. Last year, in total, the company distributed ₹24.00 to shareholders. Last year's total dividend payments show that Godfrey Phillips India has a trailing yield of 2.3% on the current share price of ₹1044. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for Godfrey Phillips India

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Godfrey Phillips India's payout ratio is modest, at just 33% of profit. A useful secondary check can be to evaluate whether Godfrey Phillips India generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 1.4% of its cash flow last year.

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.

Click here to see how much of its profit Godfrey Phillips India paid out over the last 12 months.

historic-dividend
NSEI:GODFRYPHLP Historic Dividend July 24th 2021

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. Fortunately for readers, Godfrey Phillips India's earnings per share have been growing at 17% a year for the past five years. Earnings per share are growing rapidly and the company is keeping more than half of its earnings within the business; an attractive combination which could suggest the company is focused on reinvesting to grow earnings further. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Godfrey Phillips India has lifted its dividend by approximately 17% 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.

The Bottom Line

Has Godfrey Phillips India got what it takes to maintain its dividend payments? Godfrey Phillips India has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. Godfrey Phillips India looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

While it's tempting to invest in Godfrey Phillips India for the dividends alone, you should always be mindful of the risks involved. Case in point: We've spotted 1 warning sign for Godfrey Phillips India you should be aware of.

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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