Here's What We Like About D. P. Abhushan's (NSE:DPABHUSHAN) Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see D. P. Abhushan Limited (NSE:DPABHUSHAN) is about to trade ex-dividend in the next 4 days. The ex-dividend date is usually set to be one business day 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. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. This means that investors who purchase D. P. Abhushan's shares on or after the 22nd of September will not receive the dividend, which will be paid on the 30th of October.

The company's upcoming dividend is ₹1.00 a share, following on from the last 12 months, when the company distributed a total of ₹1.00 per share to shareholders. Looking at the last 12 months of distributions, D. P. Abhushan has a trailing yield of approximately 0.2% on its current stock price of ₹546.5. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for D. P. Abhushan

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. D. P. Abhushan is paying out just 4.9% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. The good news is it paid out just 3.8% of its free cash flow in the last year.

It's positive to see that D. P. Abhushan'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 D. P. Abhushan paid out over the last 12 months.

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. That's why it's comforting to see D. P. Abhushan's earnings have been skyrocketing, up 36% per annum for the past five years. D. P. Abhushan 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.'

Unfortunately D. P. Abhushan has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

To Sum It Up

Is D. P. Abhushan worth buying for its dividend? We love that D. P. Abhushan is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. D. P. Abhushan looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

In light of that, while D. P. Abhushan has an appealing dividend, it's worth knowing the risks involved with this stock. For example, D. P. Abhushan has 2 warning signs (and 1 which is concerning) we think you should know about.

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.