Why You Might Be Interested In Aeroflex Enterprises Limited (NSE:AEROENTER) For Its Upcoming Dividend

Readers hoping to buy Aeroflex Enterprises Limited (NSE:AEROENTER) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Therefore, if you purchase Aeroflex Enterprises' shares on or after the 9th of September, you won't be eligible to receive the dividend, when it is paid on the 14th of October.

The company's upcoming dividend is ₹0.30 a share, following on from the last 12 months, when the company distributed a total of ₹0.30 per share to shareholders. Looking at the last 12 months of distributions, Aeroflex Enterprises has a trailing yield of approximately 0.3% on its current stock price of ₹87.02. If you buy this business for its dividend, you should have an idea of whether Aeroflex Enterprises's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

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. Aeroflex Enterprises paid out just 6.4% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether Aeroflex Enterprises generated enough free cash flow to afford its dividend. The good news is it paid out just 7.8% of its free cash flow in the 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.

View our latest analysis for Aeroflex Enterprises

Click here to see how much of its profit Aeroflex Enterprises paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. 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 Aeroflex Enterprises's earnings have been skyrocketing, up 80% per annum for the past five years. Aeroflex Enterprises earnings per share have been sprinting ahead like the Road Runner at a track and field day; scarcely stopping even for a cheeky "beep-beep". We also like that it is reinvesting most of its profits in its business.'

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past seven years, Aeroflex Enterprises has increased its dividend at approximately 17% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

Final Takeaway

Is Aeroflex Enterprises worth buying for its dividend? It's great that Aeroflex Enterprises is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. There's a lot to like about Aeroflex Enterprises, and we would prioritise taking a closer look at it.

On that note, you'll want to research what risks Aeroflex Enterprises is facing. For example - Aeroflex Enterprises has 2 warning signs we think you should be aware of.

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.