Here's What We Like About Jubilant Ingrevia's (NSE:JUBLINGREA) Upcoming Dividend

Jubilant Ingrevia Limited (NSE:JUBLINGREA) 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 because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. In other words, investors can purchase Jubilant Ingrevia's shares before the 23rd of August in order to be eligible for the dividend, which will be paid on the 25th of October.

The company's next dividend payment will be ₹2.50 per share. Last year, in total, the company distributed ₹5.00 to shareholders. Based on the last year's worth of payments, Jubilant Ingrevia has a trailing yield of 1.0% on the current stock price of ₹492.75. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Jubilant Ingrevia

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Jubilant Ingrevia has a low and conservative payout ratio of just 21% of its income after tax. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Luckily it paid out just 20% of its free cash flow last year.

It's positive to see that Jubilant Ingrevia'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.

Click here to see how much of its profit Jubilant Ingrevia paid out over the last 12 months.

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 fall far enough, the company could be forced to cut its dividend. With that in mind, it's good to see earnings have grown 5.7% on last year. Earnings per share have been growing at a decent rate, and the company is retaining more than three-quarters of its earnings in the business. If profits are reinvested effectively, this could be a bullish combination for future earnings and dividends.

One year is not very long in the grand scheme of things though, so we wouldn't draw too strong a conclusion based on these results.

Given that Jubilant Ingrevia has only been paying a dividend for a year, there's not much of a past history to draw insight from.

The Bottom Line

Should investors buy Jubilant Ingrevia for the upcoming dividend? Earnings per share have been growing moderately, and Jubilant Ingrevia is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. It might be nice to see earnings growing faster, but Jubilant Ingrevia is being conservative with its dividend payouts and could still perform reasonably over the long run. It's a promising combination that should mark this company worthy of closer attention.

While it's tempting to invest in Jubilant Ingrevia for the dividends alone, you should always be mindful of the risks involved. In terms of investment risks, we've identified 1 warning sign with Jubilant Ingrevia and understanding them should be part of your investment process.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.