Should You Buy Arrow Greentech Limited (NSE:ARROWGREEN) For Its Upcoming Dividend?

Readers hoping to buy Arrow Greentech Limited (NSE:ARROWGREEN) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Therefore, if you purchase Arrow Greentech's shares on or after the 12th of September, you won't be eligible to receive the dividend, when it is paid on the 16th of October.

The company's next dividend payment will be ₹2.00 per share, on the back of last year when the company paid a total of ₹2.00 to shareholders. Looking at the last 12 months of distributions, Arrow Greentech has a trailing yield of approximately 0.2% on its current stock price of ₹840.90. If you buy this business for its dividend, you should have an idea of whether Arrow Greentech's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Arrow Greentech

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. Arrow Greentech is paying out just 10% 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 Arrow Greentech generated enough free cash flow to afford its dividend. Luckily it paid out just 20% 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 Arrow Greentech paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Arrow Greentech has grown its earnings rapidly, up 64% a year for the past five years. Arrow Greentech looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Arrow Greentech has delivered an average of 10% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

To Sum It Up

Is Arrow Greentech an attractive dividend stock, or better left on the shelf? It's great that Arrow Greentech 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. It's a promising combination that should mark this company worthy of closer attention.

So while Arrow Greentech looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. To help with this, we've discovered 2 warning signs for Arrow Greentech (1 shouldn't be ignored!) that you ought to be aware of before buying the shares.

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.