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Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that D-Link (India) Limited (NSE:DLINKINDIA) is about to go ex-dividend in just 3 days. You can purchase shares before the 14th of August in order to receive the dividend, which the company will pay on the 1st of September.
D-Link (India)'s upcoming dividend is ₹0.50 a share, following on from the last 12 months, when the company distributed a total of ₹1.00 per share to shareholders. Looking at the last 12 months of distributions, D-Link (India) has a trailing yield of approximately 1.1% on its current stock price of ₹87.95. 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 check whether the dividend payments are covered, and if earnings are growing.
View our latest analysis for D-Link (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. D-Link (India) is paying out just 11% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It paid out 81% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Click here to see how much of its profit D-Link (India) 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. Fortunately for readers, D-Link (India)'s earnings per share have been growing at 15% a year for the past five years. The company paid out most of its earnings as dividends over the last year, even though business is booming and earnings per share are growing rapidly. We're surprised that management has not elected to reinvest more in the business to accelerate growth further.