It looks like Adani Ports and Special Economic Zone Limited (NSE:ADANIPORTS) 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. 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. Thus, you can purchase Adani Ports and Special Economic Zone's shares before the 24th of June in order to receive the dividend, which the company will pay on the 1st of January.
The company's next dividend payment will be ₹5.00 per share, on the back of last year when the company paid a total of ₹5.00 to shareholders. Last year's total dividend payments show that Adani Ports and Special Economic Zone has a trailing yield of 0.7% on the current share price of ₹694.35. If you buy this business for its dividend, you should have an idea of whether Adani Ports and Special Economic Zone's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Adani Ports and Special Economic Zone has a low and conservative payout ratio of just 20% of its income after tax. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. The good news is it paid out just 0.004% of its free cash flow in the last year.
It's positive to see that Adani Ports and Special Economic Zone'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.
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see Adani Ports and Special Economic Zone's earnings per share have risen 12% per annum over the last five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Adani Ports and Special Economic Zone has delivered 20% dividend growth per year on average over the past 10 years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
To Sum It Up
Is Adani Ports and Special Economic Zone an attractive dividend stock, or better left on the shelf? Adani Ports and Special Economic Zone has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. There's a lot to like about Adani Ports and Special Economic Zone, and we would prioritise taking a closer look at it.
So while Adani Ports and Special Economic Zone looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For instance, we've identified 3 warning signs for Adani Ports and Special Economic Zone (1 is significant) you should be aware of.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
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