Should Income Investors Look At Tembo Global Industries Limited (NSE:TEMBO) Before Its Ex-Dividend?

Tembo Global Industries Limited (NSE:TEMBO) stock is about to trade ex-dividend in 3 days. Investors can purchase shares before the 22nd of December in order to be eligible for this dividend, which will be paid on the 29th of January.

Tembo Global Industries's upcoming dividend is ₹1.50 a share, following on from the last 12 months, when the company distributed a total of ₹1.50 per share to shareholders. Based on the last year's worth of payments, Tembo Global Industries stock has a trailing yield of around 0.7% on the current share price of ₹208. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether Tembo Global Industries has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Tembo Global Industries

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Tembo Global Industries paid out a comfortable 32% of its profit last year. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Tembo Global Industries paid a dividend despite reporting negative free cash flow last year. That's typically a bad combination and - if this were more than a one-off - not sustainable.

Click here to see how much of its profit Tembo Global Industries 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Tembo Global Industries, with earnings per share up 6.1% on average over the last five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Tembo Global Industries has delivered an average of 73% per year annual increase in its dividend, based on the past two years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

The Bottom Line

From a dividend perspective, should investors buy or avoid Tembo Global Industries? Tembo Global Industries has seen its earnings per share grow steadily and paid out less than half its profit over the last year. Unfortunately, its dividend was not well covered by free cash flow. Overall, it's hard to get excited about Tembo Global Industries from a dividend perspective.

With that being said, if dividends aren't your biggest concern with Tembo Global Industries, you should know about the other risks facing this business. For instance, we've identified 3 warning signs for Tembo Global Industries (1 makes us a bit uncomfortable) you should be aware of.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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