Be Sure To Check Out Navneet Education Limited (NSE:NAVNETEDUL) Before It Goes Ex-Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Navneet Education Limited (NSE:NAVNETEDUL) is about to trade ex-dividend in the next 3 days. Typically, the ex-dividend date is one business day 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 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. Meaning, you will need to purchase Navneet Education's shares before the 13th of August to receive the dividend, which will be paid on the 19th of September.

The company's next dividend payment will be ₹2.60 per share. Last year, in total, the company distributed ₹2.60 to shareholders. Calculating the last year's worth of payments shows that Navneet Education has a trailing yield of 1.6% on the current share price of ₹162.79. If you buy this business for its dividend, you should have an idea of whether Navneet Education's dividend is reliable and sustainable. As a result, readers should always check whether Navneet Education has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Navneet Education

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. Navneet Education is paying out just 23% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. 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. It paid out more than half (73%) of its free cash flow in the past year, which is within an average range for most companies.

It's positive to see that Navneet Education'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 Navneet Education 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. For this reason, we're glad to see Navneet Education's earnings per share have risen 11% per annum over the last five years. Navneet Education has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Navneet Education has increased its dividend at approximately 2.7% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Navneet Education is keeping back more of its profits to grow the business.

The Bottom Line

Is Navneet Education an attractive dividend stock, or better left on the shelf? From a dividend perspective, we're encouraged to see that earnings per share have been growing, the company is paying out less than half of its earnings, and a bit over half its free cash flow. Overall we think this is an attractive combination and worthy of further research.

While it's tempting to invest in Navneet Education for the dividends alone, you should always be mindful of the risks involved. Be aware that Navneet Education is showing 3 warning signs in our investment analysis, and 1 of those shouldn't be ignored...

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.