Salzer Electronics Limited (NSE:SALZER) stock is about to trade ex-dividend in 3 days time. You can purchase shares before the 7th of August in order to receive the dividend, which the company will pay on the 9th of September.
Salzer Electronics's next dividend payment will be ₹1.60 per share, and in the last 12 months, the company paid a total of ₹1.60 per share. Calculating the last year's worth of payments shows that Salzer Electronics has a trailing yield of 1.4% on the current share price of ₹110.75. If you buy this business for its dividend, you should have an idea of whether Salzer Electronics's dividend is reliable and sustainable. As a result, readers should always check whether Salzer Electronics has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for Salzer Electronics
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Salzer Electronics has a low and conservative payout ratio of just 11% of its income after tax. 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 11% of its free cash flow as dividends last year, which is conservatively low.
It's positive to see that Salzer Electronics's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see how much of its profit Salzer Electronics paid out over the last 12 months.
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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see Salzer Electronics's earnings per share have risen 13% per annum over the last five years. Earnings per share are growing rapidly and the company is keeping more than half of its earnings within the business; an attractive combination which could suggest the company is focused on reinvesting to grow earnings further. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.