Be Sure To Check Out Surya Roshni Limited (NSE:SURYAROSNI) Before It Goes Ex-Dividend

Readers hoping to buy Surya Roshni Limited (NSE:SURYAROSNI) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a 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. This means that investors who purchase Surya Roshni's shares on or after the 4th of September will not receive the dividend, which will be paid on the 18th of October.

The company's next dividend payment will be ₹3.00 per share, and in the last 12 months, the company paid a total of ₹4.25 per share. Looking at the last 12 months of distributions, Surya Roshni has a trailing yield of approximately 1.5% on its current stock price of ₹284.00. If you buy this business for its dividend, you should have an idea of whether Surya Roshni's dividend is reliable and sustainable. As a result, readers should always check whether Surya Roshni has been able to grow its dividends, or if the dividend might be cut.

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Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Surya Roshni paid out a comfortable 27% of its profit last year. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out 22% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that Surya Roshni'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.

See our latest analysis for Surya Roshni

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

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Surya Roshni has grown its earnings rapidly, up 23% a year for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Surya Roshni has increased its dividend at approximately 33% 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.

The Bottom Line

Has Surya Roshni got what it takes to maintain its dividend payments? We love that Surya Roshni is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. It's a promising combination that should mark this company worthy of closer attention.

Want to learn more about Surya Roshni's dividend performance? Check out this visualisation of its historical revenue and earnings growth.

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.