Three Days Left To Buy Manali Petrochemicals Limited (NSE:MANALIPETC) Before The Ex-Dividend Date

It looks like Manali Petrochemicals Limited (NSE:MANALIPETC) is about to go ex-dividend in the next three days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. Thus, you can purchase Manali Petrochemicals' shares before the 10th of September in order to receive the dividend, which the company will pay on the 18th of October.

The company's upcoming dividend is ₹0.75 a share, following on from the last 12 months, when the company distributed a total of ₹0.75 per share to shareholders. Calculating the last year's worth of payments shows that Manali Petrochemicals has a trailing yield of 0.8% on the current share price of ₹89.44. If you buy this business for its dividend, you should have an idea of whether Manali Petrochemicals's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Manali Petrochemicals

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Manali Petrochemicals paid out more than half (67%) of its earnings last year, which is a regular payout ratio for most companies. A useful secondary check can be to evaluate whether Manali Petrochemicals generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 35% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that Manali Petrochemicals'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 Manali Petrochemicals 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. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're discomforted by Manali Petrochemicals's 18% per annum decline in earnings in the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Manali Petrochemicals has increased its dividend at approximately 4.1% a year on average. Growing the dividend payout ratio while earnings are declining can deliver nice returns for a while, but it's always worth checking for when the company can't increase the payout ratio any more - because then the music stops.

Final Takeaway

Should investors buy Manali Petrochemicals for the upcoming dividend? The payout ratios are within a reasonable range, implying the dividend may be sustainable. Declining earnings are a serious concern, however, and could pose a threat to the dividend in future. In summary, it's hard to get excited about Manali Petrochemicals from a dividend perspective.

However if you're still interested in Manali Petrochemicals as a potential investment, you should definitely consider some of the risks involved with Manali Petrochemicals. We've identified 2 warning signs with Manali Petrochemicals (at least 1 which is potentially serious), and understanding them should be part of your investment process.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.