Why You Might Be Interested In Rama Phosphates Limited (NSE:RAMAPHO) For Its Upcoming Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Rama Phosphates Limited (NSE:RAMAPHO) is about to go ex-dividend in just 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 of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Therefore, if you purchase Rama Phosphates' shares on or after the 31st of July, you won't be eligible to receive the dividend, when it is paid on the 4th of September.

The company's upcoming dividend is ₹0.25 a share, following on from the last 12 months, when the company distributed a total of ₹0.25 per share to shareholders. Based on the last year's worth of payments, Rama Phosphates has a trailing yield of 0.2% on the current stock price of ₹161.64. If you buy this business for its dividend, you should have an idea of whether Rama Phosphates's dividend is reliable and sustainable. So we need to investigate whether Rama Phosphates can afford its dividend, and if the dividend could grow.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Rama Phosphates is paying out just 6.5% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.

Check out our latest analysis for Rama Phosphates

Click here to see how much of its profit Rama Phosphates 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. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Rama Phosphates, with earnings per share up 9.7% on average over the last five years. 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.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. It looks like the Rama Phosphates dividends are largely the same as they were 10 years ago.

Final Takeaway

Has Rama Phosphates got what it takes to maintain its dividend payments? It has been growing its earnings per share somewhat in recent years, although it reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. Overall, Rama Phosphates looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

While it's tempting to invest in Rama Phosphates for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 3 warning signs for Rama Phosphates (of which 1 is potentially serious!) you should know about.

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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.