Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Themis Medicare Limited (NSE:THEMISMED) is about to trade ex-dividend in the next 3 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. Accordingly, Themis Medicare investors that purchase the stock on or after the 8th of September will not receive the dividend, which will be paid on the 18th of October.
The company's next dividend payment will be ₹4.30 per share. Last year, in total, the company distributed ₹4.30 to shareholders. Calculating the last year's worth of payments shows that Themis Medicare has a trailing yield of 0.4% on the current share price of ₹1084. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Themis Medicare is paying out just 6.7% 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. The good news is it paid out just 4.1% of its free cash flow in the last year.
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.
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 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 Themis Medicare's earnings have been skyrocketing, up 27% per annum for the past five years. Themis Medicare 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.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Themis Medicare has delivered 3.7% dividend growth per year on average over the past 10 years. Earnings per share have been growing much quicker than dividends, potentially because Themis Medicare is keeping back more of its profits to grow the business.
The Bottom Line
Is Themis Medicare worth buying for its dividend? Themis Medicare 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. There's a lot to like about Themis Medicare, and we would prioritise taking a closer look at it.
On that note, you'll want to research what risks Themis Medicare is facing. For example, we've found 2 warning signs for Themis Medicare that we recommend you consider before investing in the business.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting 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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