Best Agrolife Limited (NSE:BESTAGRO) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

Best Agrolife Limited (NSE:BESTAGRO) stock is about to trade ex-dividend in 3 days. 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 important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, Best Agrolife investors that purchase the stock on or after the 23rd of September will not receive the dividend, which will be paid on the 30th of October.

The company's upcoming dividend is ₹3.00 a share, following on from the last 12 months, when the company distributed a total of ₹3.00 per share to shareholders. Based on the last year's worth of payments, Best Agrolife stock has a trailing yield of around 0.8% on the current share price of ₹362.45. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Best Agrolife 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. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. The good news is it paid out just 3.4% of its free cash flow in the last year.

It's positive to see that Best Agrolife's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Check out our latest analysis for Best Agrolife

Click here to see how much of its profit Best Agrolife 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 Best Agrolife's earnings have been skyrocketing, up 51% per annum for the past five years. Best Agrolife 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.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Best Agrolife has delivered 46% dividend growth per year on average over the past nine years. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

The Bottom Line

Is Best Agrolife worth buying for its dividend? Best Agrolife has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. Best Agrolife looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

So while Best Agrolife 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 3 warning signs for Best Agrolife (2 are potentially serious) 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.