Should Income Investors Look At DMCC Speciality Chemicals Limited (NSE:DMCC) Before Its Ex-Dividend?

DMCC Speciality Chemicals Limited (NSE:DMCC) stock is about to trade ex-dividend in three days. 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase DMCC Speciality Chemicals' shares on or after the 28th of August, you won't be eligible to receive the dividend, when it is paid on the 4th of October.

The company's next dividend payment will be ₹1.00 per share, and in the last 12 months, the company paid a total of ₹1.00 per share. Last year's total dividend payments show that DMCC Speciality Chemicals has a trailing yield of 0.4% on the current share price of ₹276.10. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for DMCC Speciality 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. DMCC Speciality Chemicals paid out just 22% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.

Click here to see how much of its profit DMCC Speciality Chemicals paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're discomforted by DMCC Speciality Chemicals's 27% 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.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. DMCC Speciality Chemicals has delivered 12% dividend growth per year on average over the past six years.

The Bottom Line

Should investors buy DMCC Speciality Chemicals for the upcoming dividend? DMCC Speciality Chemicals's earnings per share are down over the past five years, although it has the cushion of a low payout ratio, which would suggest a cut to the dividend is relatively unlikely. In summary, DMCC Speciality Chemicals appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

On that note, you'll want to research what risks DMCC Speciality Chemicals is facing. To that end, you should learn about the 4 warning signs we've spotted with DMCC Speciality Chemicals (including 1 which is significant).

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.