Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see VRL Logistics Limited (NSE:VRLLOG) is about to trade ex-dividend in the next 3 days. The ex-dividend date is one business day 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 takes at least two business day to settle. Thus, you can purchase VRL Logistics' shares before the 29th of July in order to receive the dividend, which the company will pay on the 27th of August.
The company's next dividend payment will be ₹4.00 per share, and in the last 12 months, the company paid a total of ₹4.00 per share. Looking at the last 12 months of distributions, VRL Logistics has a trailing yield of approximately 1.3% on its current stock price of ₹296.8. If you buy this business for its dividend, you should have an idea of whether VRL Logistics's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
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. Its dividend payout ratio is 80% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. We'd be worried about the risk of a drop in earnings.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. VRL Logistics's earnings per share have fallen at approximately 15% a year over the previous five years. Such a sharp decline casts doubt on the future sustainability of the dividend.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. It looks like the VRL Logistics dividends are largely the same as they were six years ago. When earnings are declining yet the dividends are flat, typically the company is either paying out a higher portion of its earnings, or paying out of cash or debt on the balance sheet, neither of which is ideal.
The Bottom Line
Has VRL Logistics got what it takes to maintain its dividend payments? Earnings per share have been declining and the company is paying out more than half its profits to shareholders; not an enticing combination. We think there are likely better opportunities out there.
So if you want to do more digging on VRL Logistics, you'll find it worthwhile knowing the risks that this stock faces. We've identified 4 warning signs with VRL Logistics (at least 1 which can't be ignored), and understanding these should be part of your investment process.
If you're in the market for dividend stocks, we recommend checking our list of top 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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