Clean Science and Technology (NSE:CLEAN) Could Be A Buy For Its Upcoming Dividend

It looks like Clean Science and Technology Limited (NSE:CLEAN) is about to go ex-dividend in the next 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 because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. This means that investors who purchase Clean Science and Technology's shares on or after the 4th of September will not receive the dividend, which will be paid on the 26th of September.

The company's next dividend payment will be ₹4.00 per share, on the back of last year when the company paid a total of ₹6.00 to shareholders. Last year's total dividend payments show that Clean Science and Technology has a trailing yield of 0.5% on the current share price of ₹1174.50. If you buy this business for its dividend, you should have an idea of whether Clean Science and Technology's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Clean Science and Technology paid out just 24% 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 Clean Science and Technology generated enough free cash flow to afford its dividend. Over the last year it paid out 74% of its free cash flow as dividends, within the usual range for most companies.

It's positive to see that Clean Science and Technology'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.

See our latest analysis for Clean Science and Technology

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. For this reason, we're glad to see Clean Science and Technology's earnings per share have risen 14% per annum over the last five years. Clean Science and Technology has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. This is a reasonable combination that could hint at some further dividend increases in the future.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Clean Science and Technology has delivered 23% dividend growth per year on average over the past three years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

The Bottom Line

Has Clean Science and Technology got what it takes to maintain its dividend payments? Earnings per share have grown at a nice rate in recent times and over the last year, Clean Science and Technology paid out less than half its earnings and a bit over half its free cash flow. Overall we think this is an attractive combination and worthy of further research.

In light of that, while Clean Science and Technology has an appealing dividend, it's worth knowing the risks involved with this stock. For example - Clean Science and Technology has 1 warning sign we think you should be aware of.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.