Oberoi Realty Limited (NSE:OBEROIRLTY) Passed Our Checks, And It's About To Pay A ₹2.00 Dividend

Oberoi Realty Limited (NSE:OBEROIRLTY) is about to trade ex-dividend in the next . The ex-dividend date is usually set to be two business days 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Meaning, you will need to purchase Oberoi Realty's shares before the 20th of October to receive the dividend, which will be paid on the 14th of November.

The company's upcoming dividend is ₹2.00 a share, following on from the last 12 months, when the company distributed a total of ₹8.00 per share to shareholders. Looking at the last 12 months of distributions, Oberoi Realty has a trailing yield of approximately 0.5% on its current stock price of ₹1700.50. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

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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. Oberoi Realty paid out just 13% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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. Thankfully its dividend payments took up just 33% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that Oberoi Realty'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.

View our latest analysis for Oberoi Realty

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

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Oberoi Realty has grown its earnings rapidly, up 27% a year for the past five years. Oberoi Realty is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Oberoi Realty has delivered an average of 15% per year annual increase in its dividend, based on the past 10 years of dividend payments. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

The Bottom Line

Is Oberoi Realty worth buying for its dividend? It's great that Oberoi Realty 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. Overall we think this is an attractive combination and worthy of further research.

On that note, you'll want to research what risks Oberoi Realty is facing. For example - Oberoi Realty has 1 warning sign we think you should be aware of.

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.