Is It Smart To Buy Usha Martin Limited (NSE:USHAMART) Before It Goes Ex-Dividend?

Usha Martin Limited (NSE:USHAMART) stock is about to trade ex-dividend in three days. The ex-dividend date is usually set to be one business day 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Thus, you can purchase Usha Martin's shares before the 3rd of August in order to receive the dividend, which the company will pay on the 9th of September.

The company's next dividend payment will be ₹2.50 per share. Last year, in total, the company distributed ₹2.50 to shareholders. Calculating the last year's worth of payments shows that Usha Martin has a trailing yield of 0.7% on the current share price of ₹338.1. 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 Usha Martin has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Usha Martin

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. Usha Martin paid out just 22% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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 88% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see how much of its profit Usha Martin 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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Usha Martin has grown its earnings rapidly, up 21% a year for the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Usha Martin has delivered 32% dividend growth per year on average over the past 10 years. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

To Sum It Up

Is Usha Martin worth buying for its dividend? Earnings per share have grown at a nice rate in recent times and over the last year, Usha Martin paid out less than half its earnings and a bit over half its free cash flow. Overall we think this is an attractive combination and worthy of further research.

On that note, you'll want to research what risks Usha Martin is facing. Every company has risks, and we've spotted 1 warning sign for Usha Martin you should know about.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.