Texmaco Infrastructure & Holdings Limited (NSE:TEXINFRA) Stock Goes Ex-Dividend In Just Three Days

Texmaco Infrastructure & Holdings Limited (NSE:TEXINFRA) stock is about to trade ex-dividend in 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 important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. In other words, investors can purchase Texmaco Infrastructure & Holdings' shares before the 12th of September in order to be eligible for the dividend, which will be paid on the 19th of October.

The company's upcoming dividend is ₹0.15 a share, following on from the last 12 months, when the company distributed a total of ₹0.15 per share to shareholders. Calculating the last year's worth of payments shows that Texmaco Infrastructure & Holdings has a trailing yield of 0.2% on the current share price of ₹94.31. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

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Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Texmaco Infrastructure & Holdings lost money last year, so the fact that it's paying a dividend is certainly disconcerting. There might be a good reason for this, but we'd want to look into it further before getting comfortable. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. The good news is it paid out just 1.0% of its free cash flow in the last year.

Check out our latest analysis for Texmaco Infrastructure & Holdings

Click here to see how much of its profit Texmaco Infrastructure & Holdings 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Texmaco Infrastructure & Holdings was unprofitable last year, but at least the general trend suggests its earnings have been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Texmaco Infrastructure & Holdings's dividend payments are effectively flat on where they were 10 years ago.

Get our latest analysis on Texmaco Infrastructure & Holdings's balance sheet health here.

Final Takeaway

From a dividend perspective, should investors buy or avoid Texmaco Infrastructure & Holdings? First, it's not great to see the company paying a dividend despite being loss-making over the last year. On the plus side, the dividend was covered by free cash flow." In summary, while it has some positive characteristics, we're not inclined to race out and buy Texmaco Infrastructure & Holdings today.

While it's tempting to invest in Texmaco Infrastructure & Holdings for the dividends alone, you should always be mindful of the risks involved. To help with this, we've discovered 1 warning sign for Texmaco Infrastructure & Holdings that you should be aware of before investing in their shares.

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.