In This Article:
Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
Readers hoping to buy Onward Technologies Limited (NSE:ONWARDTEC) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. You will need to purchase shares before the 17th of July to receive the dividend, which will be paid on the 24th of August.
Onward Technologies's next dividend payment will be ₹1.50 per share. Last year, in total, the company distributed ₹1.50 to shareholders. Based on the last year's worth of payments, Onward Technologies has a trailing yield of 2.3% on the current stock price of ₹66.85. If you buy this business for its dividend, you should have an idea of whether Onward Technologies's dividend is reliable and sustainable. So we need to investigate whether Onward Technologies can afford its dividend, and if the dividend could grow.
View our latest analysis for Onward Technologies
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Onward Technologies is paying out just 23% 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 distributed 28% of its free cash flow as dividends, a comfortable payout level for most companies.
It's positive to see that Onward 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 Onward 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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Onward Technologies has grown its earnings rapidly, up 161% a year for the past five years.
Onward Technologies is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.