Why You Might Be Interested In Godawari Power & Ispat Limited (NSE:GPIL) For Its Upcoming Dividend

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Readers hoping to buy Godawari Power & Ispat Limited (NSE:GPIL) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is usually set to be two business days 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. Thus, you can purchase Godawari Power & Ispat's shares before the 14th of August in order to receive the dividend, which the company will pay on the 20th of October.

The company's next dividend payment will be ₹1.00 per share. Last year, in total, the company distributed ₹1.00 to shareholders. Based on the last year's worth of payments, Godawari Power & Ispat has a trailing yield of 0.5% on the current stock price of ₹187.88. If you buy this business for its dividend, you should have an idea of whether Godawari Power & Ispat's dividend is reliable and sustainable. So we need to investigate whether Godawari Power & Ispat can afford its dividend, and if the dividend could grow.

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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. Godawari Power & Ispat has a low and conservative payout ratio of just 7.6% of its income after tax. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Luckily it paid out just 22% of its free cash flow last year.

It's positive to see that Godawari Power & Ispat'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 Godawari Power & Ispat

Click here to see how much of its profit Godawari Power & Ispat paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Godawari Power & Ispat has grown its earnings rapidly, up 37% a year for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, Godawari Power & Ispat looks like a promising growth company.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Godawari Power & Ispat has lifted its dividend by approximately 35% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

The Bottom Line

Should investors buy Godawari Power & Ispat for the upcoming dividend? Godawari Power & Ispat has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. Overall we think this is an attractive combination and worthy of further research.

In light of that, while Godawari Power & Ispat has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 1 warning sign for Godawari Power & Ispat that we recommend you consider before investing in the business.

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.