Three Days Left Until The Sukhjit Starch & Chemicals Limited (NSE:SUKHJITS) Trades Ex-Dividend

It looks like The Sukhjit Starch & Chemicals Limited (NSE:SUKHJITS) is about to go ex-dividend in the next three days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. This means that investors who purchase Sukhjit Starch & Chemicals' shares on or after the 20th of August will not receive the dividend, which will be paid on the 25th of September.

The company's next dividend payment will be ₹1.00 per share, on the back of last year when the company paid a total of ₹1.00 to shareholders. Last year's total dividend payments show that Sukhjit Starch & Chemicals has a trailing yield of 0.6% on the current share price of ₹168.95. 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.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

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. Sukhjit Starch & Chemicals has a low and conservative payout ratio of just 7.8% of its income after tax. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. What's good is that dividends were well covered by free cash flow, with the company paying out 0.4% 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.

See our latest analysis for Sukhjit Starch & Chemicals

Click here to see how much of its profit Sukhjit Starch & Chemicals paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. So we're not too excited that Sukhjit Starch & Chemicals's earnings are down 2.3% a year over the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Sukhjit Starch & Chemicals has seen its dividend decline 2.2% per annum on average over the past 10 years, which is not great to see. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

To Sum It Up

From a dividend perspective, should investors buy or avoid Sukhjit Starch & Chemicals? Earnings per share are down meaningfully, 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 needs to be cut. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

On that note, you'll want to research what risks Sukhjit Starch & Chemicals is facing. Every company has risks, and we've spotted 4 warning signs for Sukhjit Starch & Chemicals (of which 1 is a bit concerning!) you should know about.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.