Should You Buy Rajgor Castor Derivatives Limited (NSE:RCDL) For Its Upcoming Dividend?

It looks like Rajgor Castor Derivatives Limited (NSE:RCDL) is about to go ex-dividend in the next 3 days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. In other words, investors can purchase Rajgor Castor Derivatives' shares before the 22nd of September in order to be eligible for the dividend, which will be paid on the 29th of October.

The company's next dividend payment will be ₹0.10 per share, and in the last 12 months, the company paid a total of ₹0.10 per share. Last year's total dividend payments show that Rajgor Castor Derivatives has a trailing yield of 0.4% on the current share price of ₹28.50. 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 Rajgor Castor Derivatives can afford its dividend, and if the dividend could grow.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Rajgor Castor Derivatives is paying out just 2.7% 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 Rajgor Castor Derivatives 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 2.3% of its cash flow last year.

It's positive to see that Rajgor Castor Derivatives'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.

View our latest analysis for Rajgor Castor Derivatives

Click here to see how much of its profit Rajgor Castor Derivatives 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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Rajgor Castor Derivatives's earnings have been skyrocketing, up 38% per annum for the past five years. Rajgor Castor Derivatives earnings per share have been sprinting ahead like the Road Runner at a track and field day; scarcely stopping even for a cheeky "beep-beep". We also like that it is reinvesting most of its profits in its business.'

We'd also point out that Rajgor Castor Derivatives issued a meaningful number of new shares in the past year. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.

Given that Rajgor Castor Derivatives has only been paying a dividend for a year, there's not much of a past history to draw insight from.

To Sum It Up

Is Rajgor Castor Derivatives an attractive dividend stock, or better left on the shelf? We love that Rajgor Castor Derivatives is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. It's a promising combination that should mark this company worthy of closer attention.

While it's tempting to invest in Rajgor Castor Derivatives for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 3 warning signs for Rajgor Castor Derivatives that we strongly recommend you have a look at before investing in the company.

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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.