AstraZeneca Pharma India Limited (NSE:ASTRAZEN) Is About To Go Ex-Dividend, And It Pays A 0.3% Yield

It looks like AstraZeneca Pharma India Limited (NSE:ASTRAZEN) is about to go ex-dividend in the next two days. 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. 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. Accordingly, AstraZeneca Pharma India investors that purchase the stock on or after the 18th of July will not receive the dividend, which will be paid on the 1st of January.

The company's next dividend payment will be ₹32.00 per share, and in the last 12 months, the company paid a total of ₹32.00 per share. Based on the last year's worth of payments, AstraZeneca Pharma India has a trailing yield of 0.3% on the current stock price of ₹9184.50. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

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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. AstraZeneca Pharma India paid out 69% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether AstraZeneca Pharma India generated enough free cash flow to afford its dividend. The company paid out 94% of its free cash flow over the last year, which we think is outside the ideal range for most businesses. Cash flows are usually much more volatile than earnings, so this could be a temporary effect - but we'd generally want to look more closely here.

While AstraZeneca Pharma India's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Were this to happen repeatedly, this would be a risk to AstraZeneca Pharma India's ability to maintain its dividend.

View our latest analysis for AstraZeneca Pharma India

Click here to see how much of its profit AstraZeneca Pharma India 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 earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at AstraZeneca Pharma India, with earnings per share up 9.9% on average over the last five years. Earnings have been growing at a steady rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. AstraZeneca Pharma India has delivered 59% dividend growth per year on average over the past six years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

To Sum It Up

Is AstraZeneca Pharma India worth buying for its dividend? Earnings per share have grown somewhat, although AstraZeneca Pharma India paid out over half its profits and the dividend was not well covered by free cash flow. Overall it doesn't look like the most suitable dividend stock for a long-term buy and hold investor.

Although, if you're still interested in AstraZeneca Pharma India and want to know more, you'll find it very useful to know what risks this stock faces. Be aware that AstraZeneca Pharma India is showing 3 warning signs in our investment analysis, and 1 of those is concerning...

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.