Birla Corporation Limited (NSE:BIRLACORPN) Pays A ₹10.00 Dividend In Just Three Days

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Birla Corporation Limited (NSE:BIRLACORPN) is about to go ex-dividend in just 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase Birla's shares on or after the 8th of September will not receive the dividend, which will be paid on the 15th of October.

The company's next dividend payment will be ₹10.00 per share. Last year, in total, the company distributed ₹10.00 to shareholders. Based on the last year's worth of payments, Birla stock has a trailing yield of around 0.8% on the current share price of ₹1302.20. If you buy this business for its dividend, you should have an idea of whether Birla's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

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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. Birla paid out a comfortable 26% of its profit last year. 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 6.3% 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 Birla

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

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're discomforted by Birla's 5.4% per annum decline in earnings in the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Birla has increased its dividend at approximately 5.2% a year on average.

To Sum It Up

Is Birla worth buying for its dividend? Birla has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. In summary, it's hard to get excited about Birla from a dividend perspective.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example - Birla has 1 warning sign we think you should be aware of.

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.