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Ramkrishna Forgings Limited (NSE:RKFORGE) is about to trade ex-dividend in the next 3 days. You will need to purchase shares before the 29th of August to receive the dividend, which will be paid on the 7th of October.
Ramkrishna Forgings's next dividend payment will be ₹1.50 per share. Last year, in total, the company distributed ₹1.50 to shareholders. Last year's total dividend payments show that Ramkrishna Forgings has a trailing yield of 0.4% on the current share price of ₹332.7. If you buy this business for its dividend, you should have an idea of whether Ramkrishna Forgings's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
View our latest analysis for Ramkrishna Forgings
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. Ramkrishna Forgings is paying out just 4.6% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It distributed 26% of its free cash flow as dividends, a comfortable payout level for most companies.
It's positive to see that Ramkrishna Forgings'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 the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see Ramkrishna Forgings's earnings have been skyrocketing, up 58% per annum for the past five years. Ramkrishna Forgings is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.