Dividend Investors: Don't Be Too Quick To Buy Silver Touch Technologies Limited (NSE:SILVERTUC) For Its Upcoming Dividend

By
Simply Wall St
Published
July 24, 2021
NSEI:SILVERTUC
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Readers hoping to buy Silver Touch Technologies Limited (NSE:SILVERTUC) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Typically, the ex-dividend date is one business day 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 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 Silver Touch Technologies' shares before the 29th of July in order to be eligible for the dividend, which will be paid on the 9th of September.

The company's upcoming dividend is ₹0.50 a share, following on from the last 12 months, when the company distributed a total of ₹0.50 per share to shareholders. Last year's total dividend payments show that Silver Touch Technologies has a trailing yield of 0.5% on the current share price of ₹93.95. 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 Silver Touch Technologies

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Silver Touch Technologies is paying out an acceptable 64% of its profit, a common payout level among most companies.

Click here to see how much of its profit Silver Touch Technologies paid out over the last 12 months.

historic-dividend
NSEI:SILVERTUC Historic Dividend July 25th 2021

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Readers will understand then, why we're concerned to see Silver Touch Technologies's earnings per share have dropped 22% a year over the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Silver Touch Technologies's dividend payments are effectively flat on where they were three years ago. If a company's dividend stays flat while earnings are in decline, this is typically a sign that it is paying out a larger percentage of its earnings. This can become unsustainable if earnings fall far enough.

Final Takeaway

Is Silver Touch Technologies worth buying for its dividend? Earnings per share have been declining and the company is paying out more than half its profits to shareholders; not an enticing combination. We're unconvinced on the company's merits, and think there might be better opportunities out there.

So if you want to do more digging on Silver Touch Technologies, you'll find it worthwhile knowing the risks that this stock faces. For example, we've found 4 warning signs for Silver Touch Technologies (1 is concerning!) that deserve your attention before investing in the shares.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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