Income Investors Should Know That Cyient Limited (NSE:CYIENT) Goes Ex-Dividend Soon

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Cyient Limited (NSE:CYIENT) is about to trade ex-dividend in the next three days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a 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. Thus, you can purchase Cyient's shares before the 6th of November in order to receive the dividend, which the company will pay on the 21st of November.

The company's upcoming dividend is ₹12.00 a share, following on from the last 12 months, when the company distributed a total of ₹30.00 per share to shareholders. Last year's total dividend payments show that Cyient has a trailing yield of 1.6% on the current share price of ₹1844.50. If you buy this business for its dividend, you should have an idea of whether Cyient's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Cyient

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Cyient is paying out an acceptable 50% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether Cyient generated enough free cash flow to afford its dividend. Over the last year it paid out 51% of its free cash flow as dividends, within the usual range for most companies.

It's positive to see that Cyient'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 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 earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see Cyient earnings per share are up 7.0% per annum over the last five years. While earnings have been growing at a credible rate, the company is paying out a majority of its earnings to shareholders. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Cyient has lifted its dividend by approximately 20% a year on average. 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

Should investors buy Cyient for the upcoming dividend? Earnings per share have been growing modestly and Cyient paid out a bit over half of its earnings and free cash flow last year. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.

If you want to look further into Cyient, it's worth knowing the risks this business faces. In terms of investment risks, we've identified 2 warning signs with Cyient and understanding them should be part of your investment process.

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.