Akzo Nobel India Limited (NSE:AKZOINDIA) Pays A ₹70.00 Dividend In Just Three Days

Akzo Nobel India Limited (NSE:AKZOINDIA) is about to trade ex-dividend in the next 3 days. 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. 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. Therefore, if you purchase Akzo Nobel India's shares on or after the 14th of November, you won't be eligible to receive the dividend, when it is paid on the 7th of December.

The company's next dividend payment will be ₹70.00 per share. Last year, in total, the company distributed ₹75.00 to shareholders. Based on the last year's worth of payments, Akzo Nobel India has a trailing yield of 1.8% on the current stock price of ₹4091.95. If you buy this business for its dividend, you should have an idea of whether Akzo Nobel India's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for Akzo Nobel India

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Akzo Nobel India paid out a comfortable 26% 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. It paid out 101% of its free cash flow in the form of dividends last year, which is outside the comfort zone for most businesses. Companies usually need cash more than they need earnings - expenses don't pay themselves - so it's not great to see it paying out so much of its cash flow.

While Akzo Nobel India's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Were this to happen repeatedly, this would be a risk to Akzo Nobel India's ability to maintain its dividend.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, Akzo Nobel India's earnings per share have been growing at 16% a year for the past five years. Earnings have been growing at a decent rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Akzo Nobel India's dividend payments are broadly unchanged compared to where they were 10 years ago.

Final Takeaway

Is Akzo Nobel India an attractive dividend stock, or better left on the shelf? We're glad to see the company has been improving its earnings per share while also paying out a low percentage of income. However, it's not great to see it paying out what we see as an uncomfortably high percentage of its cash flow. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Akzo Nobel India's dividend merits.

So while Akzo Nobel India looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. In terms of investment risks, we've identified 1 warning sign with Akzo Nobel India and understanding them should be part of your investment process.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.