Is It Smart To Buy TCI Express Limited (NSE:TCIEXP) Before It Goes Ex-Dividend?

By
Simply Wall St
Published
February 11, 2021
NSEI:TCIEXP
Source: Shutterstock

It looks like TCI Express Limited (NSE:TCIEXP) is about to go ex-dividend in the next 3 days. If you purchase the stock on or after the 16th of February, you won't be eligible to receive this dividend, when it is paid on the 10th of March.

TCI Express's next dividend payment will be ₹2.00 per share, on the back of last year when the company paid a total of ₹4.00 to shareholders. Based on the last year's worth of payments, TCI Express has a trailing yield of 0.4% on the current stock price of ₹979.6. If you buy this business for its dividend, you should have an idea of whether TCI Express's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for TCI Express

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. TCI Express is paying out just 15% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. A useful secondary check can be to evaluate whether TCI Express generated enough free cash flow to afford its dividend. The good news is it paid out just 18% of its free cash flow in the last year.

It's positive to see that TCI 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.

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

historic-dividend
NSEI:TCIEXP Historic Dividend February 12th 2021

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. That's why it's comforting to see TCI Express's earnings have been skyrocketing, up 220% per annum for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, TCI Express looks like a promising growth company.

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, four years ago, TCI Express has lifted its dividend by approximately 26% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

Final Takeaway

Is TCI Express an attractive dividend stock, or better left on the shelf? TCI Express has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. There's a lot to like about TCI Express, and we would prioritise taking a closer look at it.

So while TCI Express looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example, we've found 1 warning sign for TCI Express that we recommend you consider before investing in the business.

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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This article by Simply Wall St is general in nature. 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.
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