Advanced Enzyme Technologies Limited (NSE:ADVENZYMES) Will Pay A ₹1.20 Dividend In Three Days

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Advanced Enzyme Technologies Limited (NSE:ADVENZYMES) is about to trade 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Meaning, you will need to purchase Advanced Enzyme Technologies' shares before the 23rd of July to receive the dividend, which will be paid on the 29th of August.

The company's next dividend payment will be ₹1.20 per share, and in the last 12 months, the company paid a total of ₹5.20 per share. Based on the last year's worth of payments, Advanced Enzyme Technologies has a trailing yield of 1.6% on the current stock price of ₹324.45. If you buy this business for its dividend, you should have an idea of whether Advanced Enzyme Technologies's dividend is reliable and sustainable. As a result, readers should always check whether Advanced Enzyme Technologies has been able to grow its dividends, or if the dividend might be cut.

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Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Advanced Enzyme Technologies paid out a comfortable 44% of its profit last year. 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. Over the last year it paid out 53% of its free cash flow as dividends, within the usual range for most companies.

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.

Check out our latest analysis for Advanced Enzyme Technologies

Click here to see how much of its profit Advanced Enzyme Technologies paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings fall far enough, the company could be forced to cut its dividend. It's not encouraging to see that Advanced Enzyme Technologies's earnings are effectively flat over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share. Earnings per share growth has been slim, and the company is already paying out a majority of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last eight years, Advanced Enzyme Technologies has lifted its dividend by approximately 38% a year on average.

To Sum It Up

Has Advanced Enzyme Technologies got what it takes to maintain its dividend payments? Earnings per share have been flat over the eight-year timeframe we consider, and Advanced Enzyme Technologies paid out less than half its earnings and more than half its free cashflow over the last year. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Advanced Enzyme Technologies's dividend merits.

So while Advanced Enzyme Technologies looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example - Advanced Enzyme Technologies has 1 warning sign we think you should be aware of.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.