Only Three Days Left To Cash In On Polyplex's (NSE:POLYPLEX) Dividend

Polyplex Corporation Limited (NSE:POLYPLEX) is about to trade ex-dividend in the next 3 days. 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. The ex-dividend date is important as the process of settlement involves at least 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 Polyplex's shares before the 21st of November in order to receive the dividend, which the company will pay on the 13th of December.

The company's next dividend payment will be ₹2.00 per share. Last year, in total, the company distributed ₹13.50 to shareholders. Looking at the last 12 months of distributions, Polyplex has a trailing yield of approximately 1.5% on its current stock price of ₹894.95. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Polyplex has been able to grow its dividends, or if the dividend might be cut.

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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. Polyplex has a low and conservative payout ratio of just 19% 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. Over the last year it paid out 55% of its free cash flow as dividends, within the usual range for most companies.

It's positive to see that Polyplex'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 Polyplex

Click here to see how much of its profit Polyplex 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. Readers will understand then, why we're concerned to see Polyplex's earnings per share have dropped 23% a year over the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Polyplex has lifted its dividend by approximately 18% a year on average.

The Bottom Line

Is Polyplex worth buying for its dividend? Earnings per share have fallen significantly, although at least Polyplex paid out less than half of its profits and free cash flow over the last year, leaving some margin of safety. To summarise, Polyplex looks okay on this analysis, although it doesn't appear a stand-out opportunity.

With that being said, if dividends aren't your biggest concern with Polyplex, you should know about the other risks facing this business. Be aware that Polyplex is showing 3 warning signs in our investment analysis, and 1 of those is potentially serious...

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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.