Be Sure To Check Out Wonder Electricals Limited (NSE:WEL) Before It Goes Ex-Dividend

It looks like Wonder Electricals Limited (NSE:WEL) is about to go ex-dividend in the next 3 days. 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Thus, you can purchase Wonder Electricals' shares before the 18th of September in order to receive the dividend, which the company will pay on the 24th of October.

The company's next dividend payment will be ₹1.00 per share. Last year, in total, the company distributed ₹2.00 to shareholders. Calculating the last year's worth of payments shows that Wonder Electricals has a trailing yield of 0.1% on the current share price of ₹1353.90. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Wonder Electricals

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Wonder Electricals paid out a comfortable 26% of its profit last year. Wonder Electricals paid a dividend despite reporting negative free cash flow last year. That's typically a bad combination and - if this were more than a one-off - not sustainable.

Click here to see how much of its profit Wonder Electricals paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Wonder Electricals, with earnings per share up 6.0% on average over the last five years.

Given that Wonder Electricals has only been paying a dividend for a year, there's not much of a past history to draw insight from.

The Bottom Line

Is Wonder Electricals an attractive dividend stock, or better left on the shelf? Wonder Electricals has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. Overall, Wonder Electricals looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

In light of that, while Wonder Electricals has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 1 warning sign for Wonder Electricals that we recommend you consider before investing in the business.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.