AMJ Land Holdings Limited (NSE:AMJLAND) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

AMJ Land Holdings Limited (NSE:AMJLAND) stock is about to trade ex-dividend in three 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 AMJ Land Holdings' shares on or after the 29th of August will not receive the dividend, which will be paid on the 6th of October.

The company's next dividend payment will be ₹0.20 per share, and in the last 12 months, the company paid a total of ₹0.20 per share. Based on the last year's worth of payments, AMJ Land Holdings has a trailing yield of 0.4% on the current stock price of ₹53.20. If you buy this business for its dividend, you should have an idea of whether AMJ Land Holdings's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for AMJ Land Holdings

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. AMJ Land Holdings has a low and conservative payout ratio of just 7.4% of its income after tax. A useful secondary check can be to evaluate whether AMJ Land Holdings generated enough free cash flow to afford its dividend. The good news is it paid out just 3.5% of its free cash flow in the last year.

It's positive to see that AMJ Land Holdings'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 AMJ Land Holdings 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. That's why it's comforting to see AMJ Land Holdings's earnings have been skyrocketing, up 24% per annum for the past five years. AMJ Land Holdings earnings per share have been sprinting ahead like the Road Runner at a track and field day; scarcely stopping even for a cheeky "beep-beep". We also like that it is reinvesting most of its profits in its business.'

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. AMJ Land Holdings's dividend payments per share have declined at 4.0% per year on average over the past 10 years, which is uninspiring. AMJ Land Holdings is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

To Sum It Up

Is AMJ Land Holdings worth buying for its dividend? It's great that AMJ Land Holdings is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. AMJ Land Holdings looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

While it's tempting to invest in AMJ Land Holdings for the dividends alone, you should always be mindful of the risks involved. For example - AMJ Land Holdings has 2 warning signs we think you should be aware of.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.