Be Sure To Check Out Jagsonpal Pharmaceuticals Limited (NSE:JAGSNPHARM) Before It Goes Ex-Dividend

It looks like Jagsonpal Pharmaceuticals Limited (NSE:JAGSNPHARM) is about to go ex-dividend in the next 4 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 important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. This means that investors who purchase Jagsonpal Pharmaceuticals' shares on or after the 6th of September will not receive the dividend, which will be paid on the 18th of October.

The company's next dividend payment will be ₹5.00 per share. Last year, in total, the company distributed ₹5.00 to shareholders. Based on the last year's worth of payments, Jagsonpal Pharmaceuticals stock has a trailing yield of around 1.2% on the current share price of ₹411.20. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Jagsonpal Pharmaceuticals can afford its dividend, and if the dividend could grow.

View our latest analysis for Jagsonpal Pharmaceuticals

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. Jagsonpal Pharmaceuticals paid out 59% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether Jagsonpal Pharmaceuticals generated enough free cash flow to afford its dividend. It distributed 38% of its free cash flow as dividends, a comfortable payout level for most companies.

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 Jagsonpal Pharmaceuticals paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see Jagsonpal Pharmaceuticals's earnings have been skyrocketing, up 23% per annum for the past five years. The current payout ratio suggests a good balance between rewarding shareholders with dividends, and reinvesting in growth. Earnings per share have been growing quickly and in combination with some reinvestment and a middling payout ratio, the stock may have decent dividend prospects going forwards.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Jagsonpal Pharmaceuticals has delivered 26% 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

Should investors buy Jagsonpal Pharmaceuticals for the upcoming dividend? We like Jagsonpal Pharmaceuticals's growing earnings per share and the fact that - while its payout ratio is around average - it paid out a lower percentage of its cash flow. There's a lot to like about Jagsonpal Pharmaceuticals, and we would prioritise taking a closer look at it.

In light of that, while Jagsonpal Pharmaceuticals has an appealing dividend, it's worth knowing the risks involved with this stock. Case in point: We've spotted 1 warning sign for Jagsonpal Pharmaceuticals you should be aware of.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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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.