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!
Dividend paying stocks like Gallantt Metal Limited (NSE:GALLANTT) tend to be popular with investors, and for good reason - some research suggests a significant amount of all stock market returns come from reinvested dividends. If you are hoping to live on the income from dividends, it's important to be a lot more stringent with your investments than the average punter.
Some readers mightn't know much about Gallantt Metal's 0.7% dividend, as it has only been paying distributions for a year or so. Some simple analysis can reduce the risk of holding Gallantt Metal for its dividend, and we'll focus on the most important aspects below.
Explore this interactive chart for our latest analysis on Gallantt Metal!
Payout ratios
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. As a result, we should always investigate whether a company can afford its dividend, measured as a percentage of a company's net income after tax. In the last year, Gallantt Metal paid out 1.9% of its profit as dividends. We'd say its dividends are thoroughly covered by earnings.
Consider getting our latest analysis on Gallantt Metal's financial position here.
Dividend Volatility
One of the major risks of relying on dividend income, is the potential for a company to struggle financially and cut its dividend. Not only is your income cut, but the value of your investment declines as well - nasty. This company has been paying a dividend for less than 2 years, which we think is too soon to consider it a reliable dividend stock. Its most recent annual dividend was ₹0.25 per share, effectively flat on its first payment one years ago.
Modest dividend growth is good to see, especially with the payments being relatively stable. However, the payment history is relatively short and we wouldn't want to rely on this dividend too much.
Dividend Growth Potential
The other half of the dividend investing equation is evaluating whether earnings per share (EPS) are growing. Growing EPS can help maintain or increase the purchasing power of the dividend over the long run. Strong earnings per share (EPS) growth might encourage our interest in the company despite fluctuating dividends, which is why it's great to see Gallantt Metal has grown its earnings per share at 47% per annum over the past five years. The company is only paying out a fraction of its earnings as dividends, and in the past been able to use the retained earnings to grow its profits rapidly - an ideal combination.