There's A Lot To Like About Arihant Superstructures' (NSE:ARIHANTSUP) Upcoming ₹0.50 Dividend

Arihant Superstructures Limited (NSE:ARIHANTSUP) stock is about to trade ex-dividend in three 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Thus, you can purchase Arihant Superstructures' shares before the 15th of September in order to receive the dividend, which the company will pay on the 23rd of October.

The company's next dividend payment will be ₹0.50 per share, on the back of last year when the company paid a total of ₹0.50 to shareholders. Based on the last year's worth of payments, Arihant Superstructures stock has a trailing yield of around 0.3% on the current share price of ₹182.4. If you buy this business for its dividend, you should have an idea of whether Arihant Superstructures's dividend is reliable and sustainable. So we need to investigate whether Arihant Superstructures can afford its dividend, and if the dividend could grow.

View our latest analysis for Arihant Superstructures

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. Arihant Superstructures has a low and conservative payout ratio of just 4.8% of its income after tax. Arihant Superstructures paid a dividend despite reporting negative free cash flow over the last twelve months. This may be due to heavy investment in the business, but this is still suboptimal from a dividend sustainability perspective.

Click here to see how much of its profit Arihant Superstructures 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 Arihant Superstructures's earnings have been skyrocketing, up 29% per annum for the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Arihant Superstructures has delivered an average of 9.6% per year annual increase in its dividend, based on the past 10 years of dividend payments. 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 Arihant Superstructures worth buying for its dividend? Companies like Arihant Superstructures that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. We think this is a pretty attractive combination, and would be interested in investigating Arihant Superstructures more closely.

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 Arihant Superstructures (1 doesn't sit too well with us!) that you ought to be aware of before buying the shares.

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.