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Dalmia Bharat Sugar and Industries Limited (NSE:DALMIASUG) is about to trade ex-dividend in the next 3 days. Ex-dividend means that investors that purchase the stock on or after the 20th of August will not receive this dividend, which will be paid on the 28th of September.
Dalmia Bharat Sugar and Industries's upcoming dividend is ₹1.60 a share, following on from the last 12 months, when the company distributed a total of ₹1.60 per share to shareholders. Based on the last year's worth of payments, Dalmia Bharat Sugar and Industries has a trailing yield of 2.0% on the current stock price of ₹80.45. If you buy this business for its dividend, you should have an idea of whether Dalmia Bharat Sugar and Industries's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
See our latest analysis for Dalmia Bharat Sugar and Industries
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Dalmia Bharat Sugar and Industries is paying out just 7.6% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. Dalmia Bharat Sugar and Industries paid a dividend despite reporting negative free cash flow last year. That's typically a bad combination and - if this were more than a one-off - not sustainable.
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. It's encouraging to see Dalmia Bharat Sugar and Industries has grown its earnings rapidly, up 124% a year for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Dalmia Bharat Sugar and Industries has seen its dividend decline 6.1% per annum on average over the past 10 years, which is not great to see. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.
The Bottom Line
Should investors buy Dalmia Bharat Sugar and Industries for the upcoming dividend? Dalmia Bharat Sugar and Industries has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past ten years, but the conservative payout ratio makes the current dividend look sustainable. There's a lot to like about Dalmia Bharat Sugar and Industries, and we would prioritise taking a closer look at it.