Ashiana Housing Limited (NSE:ASHIANA) Will Pay A ₹1.50 Dividend In Three Days

Ashiana Housing Limited (NSE:ASHIANA) is about to trade ex-dividend in the next 3 days. Typically, the ex-dividend date is two business days 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 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. Meaning, you will need to purchase Ashiana Housing's shares before the 18th of September to receive the dividend, which will be paid on the 25th of October.

The company's next dividend payment will be ₹1.50 per share, on the back of last year when the company paid a total of ₹3.00 to shareholders. Based on the last year's worth of payments, Ashiana Housing stock has a trailing yield of around 1.0% on the current share price of ₹313.50. If you buy this business for its dividend, you should have an idea of whether Ashiana Housing's dividend is reliable and sustainable. As a result, readers should always check whether Ashiana Housing has been able to grow its dividends, or if the dividend might be cut.

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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. Ashiana Housing distributed an unsustainably high 138% of its profit as dividends to shareholders last year. Without extenuating circumstances, we'd consider the dividend at risk of a cut. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Luckily it paid out just 7.8% of its free cash flow last year.

It's good to see that while Ashiana Housing's dividends were not covered by profits, at least they are affordable from a cash perspective. If executives were to continue paying more in dividends than the company reported in profits, we'd view this as a warning sign. Extraordinarily few companies are capable of persistently paying a dividend that is greater than their profits.

See our latest analysis for Ashiana Housing

Click here to see how much of its profit Ashiana Housing 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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Ashiana Housing's earnings have been skyrocketing, up 53% per annum for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Ashiana Housing has lifted its dividend by approximately 20% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

The Bottom Line

Is Ashiana Housing an attractive dividend stock, or better left on the shelf? It's good to see earnings per share growing and low cashflow payout ratio, although we're uncomfortable with Ashiana Housing's paying out such a high percentage of its profit. Overall, it's hard to get excited about Ashiana Housing from a dividend perspective.

On that note, you'll want to research what risks Ashiana Housing is facing. For example, we've found 1 warning sign for Ashiana Housing that we recommend you consider before investing in the business.

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.