Albert David Limited (NSE:ALBERTDAVD) Passed Our Checks, And It's About To Pay A ₹6.00 Dividend

Simply Wall St
September 01, 2021
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Readers hoping to buy Albert David Limited (NSE:ALBERTDAVD) 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, Albert David investors that purchase the stock on or after the 6th of September will not receive the dividend, which will be paid on the 14th of October.

The company's next dividend payment will be ₹6.00 per share, on the back of last year when the company paid a total of ₹6.00 to shareholders. Last year's total dividend payments show that Albert David has a trailing yield of 1.0% on the current share price of ₹571.45. If you buy this business for its dividend, you should have an idea of whether Albert David's dividend is reliable and sustainable. So we need to investigate whether Albert David can afford its dividend, and if the dividend could grow.

View our latest analysis for Albert David

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Albert David has a low and conservative payout ratio of just 10% of its income after tax. A useful secondary check can be to evaluate whether Albert David generated enough free cash flow to afford its dividend. The good news is it paid out just 0.1% of its free cash flow in the last year.

It's positive to see that Albert David'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 Albert David paid out over the last 12 months.

NSEI:ALBERTDAVD Historic Dividend September 2nd 2021

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 earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Albert David's earnings have been skyrocketing, up 36% per annum for the past five years. Albert David 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 last 10 years, Albert David has lifted its dividend by approximately 2.9% a year on average. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

Final Takeaway

From a dividend perspective, should investors buy or avoid Albert David? Albert David has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. Albert David looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Our analysis shows 2 warning signs for Albert David and you should be aware of these before buying any shares.

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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