Agro Phos (India) (NSE:AGROPHOS) Could Be A Buy For Its Upcoming Dividend

It looks like Agro Phos (India) Limited (NSE:AGROPHOS) is about to go ex-dividend in the next 3 days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled 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. Meaning, you will need to purchase Agro Phos (India)'s shares before the 23rd of September to receive the dividend, which will be paid on the 30th 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. Calculating the last year's worth of payments shows that Agro Phos (India) has a trailing yield of 2.5% on the current share price of ₹39.98. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Agro Phos (India) has been able to grow its dividends, or if the dividend might be cut.

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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. Fortunately Agro Phos (India)'s payout ratio is modest, at just 40% of profit.

Check out our latest analysis for Agro Phos (India)

Click here to see how much of its profit Agro Phos (India) 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 earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Agro Phos (India)'s earnings per share have been growing at 20% a year for the past five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Agro Phos (India) has delivered 53% dividend growth per year on average over the past seven years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

To Sum It Up

From a dividend perspective, should investors buy or avoid Agro Phos (India)? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. In summary, Agro Phos (India) appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

So while Agro Phos (India) looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For instance, we've identified 5 warning signs for Agro Phos (India) (3 make us uncomfortable) you should be aware of.

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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.