Three Days Left Until Total Transport Systems Limited (NSE:TOTAL) Trades Ex-Dividend

Total Transport Systems Limited (NSE:TOTAL) is about to trade 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 Total Transport Systems' shares before the 22nd of February in order to receive the dividend, which the company will pay on the 11th of March.

The company's next dividend payment will be ₹0.75 per share. Last year, in total, the company distributed ₹1.50 to shareholders. Last year's total dividend payments show that Total Transport Systems has a trailing yield of 1.2% on the current share price of ₹129.5. 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.

See our latest analysis for Total Transport Systems

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. Total Transport Systems is paying out just 14% 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 Total Transport Systems generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 28% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that Total Transport Systems'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 Total Transport Systems paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. 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 not ideal to see Total Transport Systems's earnings per share have been shrinking at 3.1% a year over the previous five years.

Unfortunately Total Transport Systems 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

From a dividend perspective, should investors buy or avoid Total Transport Systems? Total Transport Systems has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. In summary, it's hard to get excited about Total Transport Systems from a dividend perspective.

So while Total Transport Systems looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. In terms of investment risks, we've identified 3 warning signs with Total Transport Systems and understanding them should be part of your investment process.

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.