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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 TTK Prestige Limited (NSE:TTKPRESTIG) is about to trade ex-dividend in the next 3 days. If you purchase the stock on or after the 7th of August, you won't be eligible to receive this dividend, when it is paid on the 11th of September.
TTK Prestige's next dividend payment will be ₹30.00 per share, on the back of last year when the company paid a total of ₹30.00 to shareholders. Looking at the last 12 months of distributions, TTK Prestige has a trailing yield of approximately 0.6% on its current stock price of ₹5363.2. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.
Check out our latest analysis for TTK Prestige
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. TTK Prestige has a low and conservative payout ratio of just 18% of its income after tax. 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 paid out 94% of its free cash flow in the form of dividends last year, which is outside the comfort zone for most businesses. Companies usually need cash more than they need earnings - expenses don't pay themselves - so it's not great to see it paying out so much of its cash flow.
TTK Prestige paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Cash is king, as they say, and were TTK Prestige to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, TTK Prestige's earnings per share have been growing at 11% a year for the past five years. Earnings have been growing at a decent rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.