In This Article:
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Tata Metaliks Limited (NSE:TATAMETALI) is about to trade ex-dividend in the next 3 days. You can purchase shares before the 16th of August in order to receive the dividend, which the company will pay on the 26th of September.
Tata Metaliks's next dividend payment will be ₹3.50 per share, and in the last 12 months, the company paid a total of ₹3.50 per share. Calculating the last year's worth of payments shows that Tata Metaliks has a trailing yield of 0.7% on the current share price of ₹505.05. If you buy this business for its dividend, you should have an idea of whether Tata Metaliks's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
See our latest analysis for Tata Metaliks
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Tata Metaliks is paying out just 5.3% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. A useful secondary check can be to evaluate whether Tata Metaliks generated enough free cash flow to afford its dividend. It paid out 2.6% of its free cash flow as dividends last year, which is conservatively low.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Tata Metaliks has grown its earnings rapidly, up 35% a year for the past five years. Tata Metaliks earnings per share have been sprinting ahead like the Road Runner at a track and field day; scarcely stopping even for a cheeky "beep-beep". We also like that it is reinvesting most of its profits in its business.
Tata Metaliks also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.