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Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see JMC Projects (India) Limited (NSE:JMCPROJECT) is about to trade ex-dividend in the next 3 days. You can purchase shares before the 22nd of July in order to receive the dividend, which the company will pay on the 28th of August.
JMC Projects (India)'s next dividend payment will be ₹0.70 per share. Last year, in total, the company distributed ₹0.70 to shareholders. Looking at the last 12 months of distributions, JMC Projects (India) has a trailing yield of approximately 0.5% on its current stock price of ₹130.05. If you buy this business for its dividend, you should have an idea of whether JMC Projects (India)'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 JMC Projects (India)
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. JMC Projects (India) is paying out just 15% 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. The good news is it paid out just 7.2% of its free cash flow in the last year.
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?
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see JMC Projects (India)'s earnings have been skyrocketing, up 42% per annum for the past five years.
JMC Projects (India) looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. JMC Projects (India) has delivered an average of 5.8% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.