Blue Dart Express (NSE:BLUEDART) Could Be A Buy For Its Upcoming Dividend

Blue Dart Express Limited (NSE:BLUEDART) stock is about to trade ex-dividend in day or two. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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 Blue Dart Express' shares on or after the 6th of August, you won't be eligible to receive the dividend, when it is paid on the 12th of September.

The company's upcoming dividend is ₹25.00 a share, following on from the last 12 months, when the company distributed a total of ₹25.00 per share to shareholders. Last year's total dividend payments show that Blue Dart Express has a trailing yield of 0.4% on the current share price of ₹5888.00. If you buy this business for its dividend, you should have an idea of whether Blue Dart Express's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

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. Blue Dart Express has a low and conservative payout ratio of just 24% of its income after tax. A useful secondary check can be to evaluate whether Blue Dart Express generated enough free cash flow to afford its dividend. The good news is it paid out just 12% of its free cash flow in the last year.

It's positive to see that Blue Dart Express'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.

View our latest analysis for Blue Dart Express

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see Blue Dart Express's earnings per share have risen 19% 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. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Blue Dart Express has lifted its dividend by approximately 2.3% a year on average. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

Final Takeaway

From a dividend perspective, should investors buy or avoid Blue Dart Express? Blue Dart Express 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 Blue Dart Express, and we would prioritise taking a closer look at it.

So while Blue Dart Express looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example - Blue Dart Express has 1 warning sign we think you should be aware of.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.