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It looks like IntraSoft Technologies Limited (NSE:ISFT) is about to go ex-dividend in the next 3 days. Ex-dividend means that investors that purchase the stock on or after the 30th of August will not receive this dividend, which will be paid on the 10th of October.
IntraSoft Technologies's next dividend payment will be ₹2.00 per share. Last year, in total, the company distributed ₹2.00 to shareholders. Calculating the last year's worth of payments shows that IntraSoft Technologies has a trailing yield of 2.6% on the current share price of ₹83.65. 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! So we need to check whether the dividend payments are covered, and if earnings are growing.
See our latest analysis for IntraSoft Technologies
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. IntraSoft Technologies paid out a comfortable 50% of its profit last year. 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. Over the last year it paid out 67% of its free cash flow as dividends, within the usual range for most companies.
It's positive to see that IntraSoft Technologies'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 IntraSoft Technologies paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. 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 IntraSoft Technologies has grown its earnings rapidly, up 23% a year for the past five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 9 years, IntraSoft Technologies has lifted its dividend by approximately 3.2% a year on average. Earnings per share have been growing much quicker than dividends, potentially because IntraSoft Technologies is keeping back more of its profits to grow the business.