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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 Rane Brake Lining Limited (NSE:RBL) is about to trade ex-dividend in the next 3 days. Ex-dividend means that investors that purchase the stock on or after the 17th of July will not receive this dividend, which will be paid on the 30th of July.
Rane Brake Lining's next dividend payment will be ₹9.00 per share, and in the last 12 months, the company paid a total of ₹15.50 per share. Based on the last year's worth of payments, Rane Brake Lining has a trailing yield of 2.6% on the current stock price of ₹605.2. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
View our latest analysis for Rane Brake Lining
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. That's why it's good to see Rane Brake Lining paying out a modest 34% of its earnings. 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. It paid out 83% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.
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 how much of its profit Rane Brake Lining paid out over the last 12 months.
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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, Rane Brake Lining's earnings per share have been growing at 16% a year for the past five years.
The company paid out most of its earnings as dividends over the last year, even though business is booming and earnings per share are growing rapidly. We're surprised that management has not elected to reinvest more in the business to accelerate growth further.