Should You Buy Kovai Medical Center and Hospital Limited (NSE:KOVAI) For Its Upcoming Dividend?

Readers hoping to buy Kovai Medical Center and Hospital Limited (NSE:KOVAI) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day 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. Therefore, if you purchase Kovai Medical Center and Hospital's shares on or after the 11th of August, you won't be eligible to receive the dividend, when it is paid on the 24th of September.

The company's upcoming dividend is ₹10.00 a share, following on from the last 12 months, when the company distributed a total of ₹10.00 per share to shareholders. Based on the last year's worth of payments, Kovai Medical Center and Hospital stock has a trailing yield of around 0.4% on the current share price of ₹2640.8. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Kovai Medical Center and Hospital

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. Kovai Medical Center and Hospital has a low and conservative payout ratio of just 4.7% 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. Luckily it paid out just 2.4% of its free 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 Kovai Medical Center and Hospital 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 earnings fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see Kovai Medical Center and Hospital's earnings per share have risen 15% per annum over the last five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Kovai Medical Center and Hospital has delivered an average of 21% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

Final Takeaway

Is Kovai Medical Center and Hospital worth buying for its dividend? Kovai Medical Center and Hospital 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. Kovai Medical Center and Hospital looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

Curious about whether Kovai Medical Center and Hospital has been able to consistently generate growth? Here's a chart of its historical 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.