Shalby Limited (NSE:SHALBY) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

By
Simply Wall St
Published
September 12, 2021
NSEI:SHALBY
Source: Shutterstock

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Shalby Limited (NSE:SHALBY) is about to trade ex-dividend in the next 3 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. 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 Shalby's shares before the 17th of September in order to be eligible for the dividend, which will be paid on the 27th of October.

The company's next dividend payment will be ₹1.00 per share. Last year, in total, the company distributed ₹1.00 to shareholders. Looking at the last 12 months of distributions, Shalby has a trailing yield of approximately 0.5% on its current stock price of ₹190.95. If you buy this business for its dividend, you should have an idea of whether Shalby's dividend is reliable and sustainable. As a result, readers should always check whether Shalby has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Shalby

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Shalby is paying out just 15% 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 Shalby generated enough free cash flow to afford its dividend. Luckily it paid out just 9.3% 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 Shalby paid out over the last 12 months.

historic-dividend
NSEI:SHALBY Historic Dividend September 13th 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Shalby earnings per share are up 8.9% per annum over the last five years. Earnings per share have been increasing steadily and management is reinvesting almost all of the profits back into the business. If profits are reinvested effectively, this could be a bullish combination for future earnings and dividends.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, two years ago, Shalby has lifted its dividend by approximately 41% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

Is Shalby an attractive dividend stock, or better left on the shelf? Earnings per share have been growing moderately, and Shalby is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Shalby is halfway there. It's a promising combination that should mark this company worthy of closer attention.

While it's tempting to invest in Shalby for the dividends alone, you should always be mindful of the risks involved. For example, we've found 3 warning signs for Shalby (1 shouldn't be ignored!) that deserve your attention before investing in the shares.

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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