Jindal Stainless Limited (NSE:JSL) Passed Our Checks, And It's About To Pay A ₹2.00 Dividend

Jindal Stainless Limited (NSE:JSL) is about to trade ex-dividend in the next three days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase Jindal Stainless' shares on or after the 30th of August, you won't be eligible to receive the dividend, when it is paid on the 9th of October.

The company's next dividend payment will be ₹2.00 per share, on the back of last year when the company paid a total of ₹4.00 to shareholders. Based on the last year's worth of payments, Jindal Stainless has a trailing yield of 0.5% on the current stock price of ₹730.80. If you buy this business for its dividend, you should have an idea of whether Jindal Stainless's dividend is reliable and sustainable. As a result, readers should always check whether Jindal Stainless has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Jindal Stainless

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. Jindal Stainless is paying out just 9.1% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. 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. The good news is it paid out just 8.5% 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.

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

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Jindal Stainless's earnings have been skyrocketing, up 61% per annum for the past five years. Jindal Stainless 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.

Unfortunately Jindal Stainless has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

The Bottom Line

Is Jindal Stainless an attractive dividend stock, or better left on the shelf? Jindal Stainless has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. There's a lot to like about Jindal Stainless, and we would prioritise taking a closer look at it.

On that note, you'll want to research what risks Jindal Stainless is facing. In terms of investment risks, we've identified 1 warning sign with Jindal Stainless and understanding them should be part of your investment process.

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.