Why You Might Be Interested In Chambal Fertilisers and Chemicals Limited (NSE:CHAMBLFERT) For Its Upcoming Dividend

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 Chambal Fertilisers and Chemicals Limited (NSE:CHAMBLFERT) is about to go ex-dividend in just three days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. 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. Meaning, you will need to purchase Chambal Fertilisers and Chemicals' shares before the 19th of November to receive the dividend, which will be paid on the 5th of December.

The company's next dividend payment will be ₹5.00 per share, and in the last 12 months, the company paid a total of ₹8.00 per share. Looking at the last 12 months of distributions, Chambal Fertilisers and Chemicals has a trailing yield of approximately 1.7% on its current stock price of ₹469.85. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Chambal Fertilisers and Chemicals can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Chambal Fertilisers and Chemicals

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. Chambal Fertilisers and Chemicals paid out just 21% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether Chambal Fertilisers and Chemicals generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 19% of its 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 the company's payout ratio, plus analyst estimates of its future dividends.

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 earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Chambal Fertilisers and Chemicals has grown its earnings rapidly, up 22% a year for the past five years. Chambal Fertilisers and Chemicals 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.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Chambal Fertilisers and Chemicals has delivered 15% dividend growth per year on average over the past 10 years. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

Final Takeaway

Has Chambal Fertilisers and Chemicals got what it takes to maintain its dividend payments? It's great that Chambal Fertilisers and Chemicals 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.

On that note, you'll want to research what risks Chambal Fertilisers and Chemicals is facing. To help with this, we've discovered 1 warning sign for Chambal Fertilisers and Chemicals that you should be aware of before investing in their shares.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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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.