Holmarc Opto-Mechatronics Limited (NSE:HOLMARC) Passed Our Checks, And It's About To Pay A ₹0.40 Dividend

Holmarc Opto-Mechatronics Limited (NSE:HOLMARC) stock is about to trade ex-dividend in three days. The ex-dividend date is usually set to be two business days 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Meaning, you will need to purchase Holmarc Opto-Mechatronics' shares before the 12th of September to receive the dividend, which will be paid on the 20th of October.

The company's next dividend payment will be ₹0.40 per share, on the back of last year when the company paid a total of ₹0.40 to shareholders. Calculating the last year's worth of payments shows that Holmarc Opto-Mechatronics has a trailing yield of 0.3% on the current share price of ₹121.95. 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! We need to see whether the dividend is covered by earnings and if it's growing.

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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. Holmarc Opto-Mechatronics has a low and conservative payout ratio of just 11% of its income after tax. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Over the last year it paid out 57% of its free cash flow as dividends, within the usual range for most companies.

It's positive to see that Holmarc Opto-Mechatronics'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.

See our latest analysis for Holmarc Opto-Mechatronics

Click here to see how much of its profit Holmarc Opto-Mechatronics 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Holmarc Opto-Mechatronics has grown its earnings rapidly, up 26% a year for the past five years.

Unfortunately Holmarc Opto-Mechatronics has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

Final Takeaway

Has Holmarc Opto-Mechatronics got what it takes to maintain its dividend payments? From a dividend perspective, we're encouraged to see that earnings per share have been growing, the company is paying out less than half of its earnings, and a bit over half its free cash flow. Overall we think this is an attractive combination and worthy of further research.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Case in point: We've spotted 2 warning signs for Holmarc Opto-Mechatronics you should be aware of.

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.