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Advani Hotels & Resorts (India) Limited (NSE:ADVANIHOTR) is about to trade ex-dividend in the next 2 days. Ex-dividend means that investors that purchase the stock on or after the 26th of September will not receive this dividend, which will be paid on the 17th of October.
Advani Hotels & Resorts (India)'s next dividend payment will be ₹0.8 per share, on the back of last year when the company paid a total of ₹2.0 to shareholders. Calculating the last year's worth of payments shows that Advani Hotels & Resorts (India) has a trailing yield of 3.6% on the current share price of ₹55.3. If you buy this business for its dividend, you should have an idea of whether Advani Hotels & Resorts (India)'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 Advani Hotels & Resorts (India)
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. Its dividend payout ratio is 86% 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 It could become a concern if earnings started to decline. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Fortunately, it paid out only 45% of its free cash flow in the past year.
It's positive to see that Advani Hotels & Resorts (India)'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.
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Advani Hotels & Resorts (India) has grown its earnings rapidly, up 37% a year for the past five years. The company is paying out more than three-quarters of its earnings, but it is also generating strong earnings growth.