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India Glycols Limited (NSE:INDIAGLYCO) is about to trade ex-dividend in the next 3 days. You will need to purchase shares before the 13th of August to receive the dividend, which will be paid on the 21st of September.
India Glycols's next dividend payment will be ₹6.00 per share, on the back of last year when the company paid a total of ₹6.00 to shareholders. Calculating the last year's worth of payments shows that India Glycols has a trailing yield of 2.9% on the current share price of ₹205.25. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether India Glycols can afford its dividend, and if the dividend could grow.
See our latest analysis for India Glycols
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. India Glycols paid out just 14% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether India Glycols generated enough free cash flow to afford its dividend. Over the past year it paid out 157% of its free cash flow as dividends, which is uncomfortably high. It's hard to consistently pay out more cash than you generate without either borrowing or using company cash, so we'd wonder how the company justifies this payout level.
While India Glycols's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Cash is king, as they say, and were India Glycols to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.
Click here to see how much of its profit India Glycols paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see India Glycols's earnings have been skyrocketing, up 64% per annum for the past five years. Earnings have been growing quickly, but we're concerned dividend payments consumed most of the company's cash flow over the past year.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. India Glycols 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.