Why You Might Be Interested In GPT Healthcare Limited (NSE:GPTHEALTH) For Its Upcoming Dividend

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 GPT Healthcare Limited (NSE:GPTHEALTH) is about to go ex-dividend in just three 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. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Meaning, you will need to purchase GPT Healthcare's shares before the 28th of November to receive the dividend, which will be paid on the 13th of December.

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 ₹3.00 to shareholders. Based on the last year's worth of payments, GPT Healthcare stock has a trailing yield of around 1.8% on the current share price of ₹164.28. 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 check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for GPT Healthcare

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. Fortunately GPT Healthcare's payout ratio is modest, at just 41% of profit. 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 paid out more than half (54%) of its free cash flow in the past year, which is within an average range for most companies.

It's positive to see that GPT Healthcare'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 GPT Healthcare paid out over the last 12 months.

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 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 GPT Healthcare's earnings have been skyrocketing, up 26% per annum for the past five years.

Given that GPT Healthcare 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

Has GPT Healthcare got what it takes to maintain its dividend payments? From a dividend perspective, we're encouraged to see that earnings per share have been growing, the company is paying out less than half of its earnings, and a bit over half its free cash flow. There's a lot to like about GPT Healthcare, and we would prioritise taking a closer look at it.

Want to learn more about GPT Healthcare? Here's a visualisation of its historical rate of revenue and earnings growth.

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.