Shilpa Medicare Limited (NSE:SHILPAMED) Goes Ex-Dividend Soon

Shilpa Medicare Limited (NSE:SHILPAMED) is about to trade ex-dividend in the next 3 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. 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. This means that investors who purchase Shilpa Medicare's shares on or after the 17th of September will not receive the dividend, which will be paid on the 28th of October.

The company's next dividend payment will be ₹1.10 per share. Last year, in total, the company distributed ₹1.10 to shareholders. Last year's total dividend payments show that Shilpa Medicare has a trailing yield of 0.2% on the current share price of ₹609.6. 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! We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Shilpa Medicare

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. Shilpa Medicare has a low and conservative payout ratio of just 14% of its income after tax. Shilpa Medicare paid a dividend despite reporting negative free cash flow last year. That's typically a bad combination and - if this were more than a one-off - not sustainable.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. Readers will understand then, why we're concerned to see Shilpa Medicare's earnings per share have dropped 11% a year over the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Shilpa Medicare has lifted its dividend by approximately 15% a year on average.

The Bottom Line

From a dividend perspective, should investors buy or avoid Shilpa Medicare? Earnings per share have shrunk noticeably in recent years, although we like that the company has a low payout ratio. This could suggest a cut to the dividend may not be a major risk in the near future. Shilpa Medicare ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. To help with this, we've discovered 2 warning signs for Shilpa Medicare (1 shouldn't be ignored!) that you ought to be aware of before buying the shares.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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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.
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