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Everest Industries Limited (NSE:EVERESTIND) stock is about to trade ex-dividend in 2 days time. You will need to purchase shares before the 16th of July to receive the dividend, which will be paid on the 23rd of August.
Everest Industries's upcoming dividend is ₹7.50 a share, following on from the last 12 months, when the company distributed a total of ₹7.50 per share to shareholders. Looking at the last 12 months of distributions, Everest Industries has a trailing yield of approximately 1.9% on its current stock price of ₹391.25. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.
Check out our latest analysis for Everest Industries
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. Everest Industries paid out just 19% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Everest Industries paid out more free cash flow than it generated - 140%, to be precise - last year, which we think is concerningly high. It's hard to consistently pay out more cash than you generate without either borrowing or using company cash, so we'd wonder how the company justifies this payout level.
Everest Industries paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Cash is king, as they say, and were Everest Industries to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Everest Industries's earnings have been skyrocketing, up 46% per annum for the past five years.