There's A Lot To Like About Shivalik Bimetal Controls' (NSE:SBCL) Upcoming ₹1.00 Dividend

Readers hoping to buy Shivalik Bimetal Controls Limited (NSE:SBCL) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Therefore, if you purchase Shivalik Bimetal Controls' shares on or after the 19th of September, you won't be eligible to receive the dividend, when it is paid on the 26th of October.

The company's next dividend payment will be ₹1.00 per share, and in the last 12 months, the company paid a total of ₹2.00 per share. Last year's total dividend payments show that Shivalik Bimetal Controls has a trailing yield of 0.3% on the current share price of ₹575.20. If you buy this business for its dividend, you should have an idea of whether Shivalik Bimetal Controls's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Shivalik Bimetal Controls

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. Shivalik Bimetal Controls has a low and conservative payout ratio of just 12% of its income after tax. A useful secondary check can be to evaluate whether Shivalik Bimetal Controls generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 17% of its cash flow last year.

It's positive to see that Shivalik Bimetal Controls'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 Shivalik Bimetal Controls 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Shivalik Bimetal Controls has grown its earnings rapidly, up 27% a year for the past five years. Shivalik Bimetal Controls 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.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past eight years, Shivalik Bimetal Controls has increased its dividend at approximately 36% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

Final Takeaway

From a dividend perspective, should investors buy or avoid Shivalik Bimetal Controls? Shivalik Bimetal Controls has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past eight years, but the conservative payout ratio makes the current dividend look sustainable. Overall we think this is an attractive combination and worthy of further research.

While it's tempting to invest in Shivalik Bimetal Controls for the dividends alone, you should always be mindful of the risks involved. For example - Shivalik Bimetal Controls has 1 warning sign we think you should be aware of.

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