Three Days Left Until D-Link (India) Limited (NSE:DLINKINDIA) Trades Ex-Dividend

Readers hoping to buy D-Link (India) Limited (NSE:DLINKINDIA) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Therefore, if you purchase D-Link (India)'s shares on or after the 14th of November, you won't be eligible to receive the dividend, when it is paid on the 5th of December.

The company's next dividend payment will be ₹6.00 per share, on the back of last year when the company paid a total of ₹20.00 to shareholders. Calculating the last year's worth of payments shows that D-Link (India) has a trailing yield of 4.5% on the current share price of ₹442.00. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is 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. D-Link (India) is paying out an acceptable 51% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether D-Link (India) generated enough free cash flow to afford its dividend. Dividends consumed 56% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

View our latest analysis for D-Link (India)

Click here to see how much of its profit D-Link (India) 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 earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see D-Link (India) has grown its earnings rapidly, up 24% a year for the past five years. The current payout ratio suggests a good balance between rewarding shareholders with dividends, and reinvesting in growth. Earnings per share have been growing quickly and in combination with some reinvestment and a middling payout ratio, the stock may have decent dividend prospects going forwards.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, D-Link (India) has increased its dividend at approximately 40% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

To Sum It Up

Is D-Link (India) worth buying for its dividend? Higher earnings per share generally lead to higher dividends from dividend-paying stocks over the long run. That's why we're glad to see D-Link (India)'s earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow - 51% and 56% respectively. In summary, it's hard to get excited about D-Link (India) from a dividend perspective.

While it's tempting to invest in D-Link (India) for the dividends alone, you should always be mindful of the risks involved. In terms of investment risks, we've identified 1 warning sign with D-Link (India) and understanding them should be part of your investment process.

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.