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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 SIL Investments Limited (NSE:SILINV) is about to trade ex-dividend in the next 3 days. This means that investors who purchase shares on or after the 20th of August will not receive the dividend, which will be paid on the 21st of September.
SIL Investments's next dividend payment will be ₹1.50 per share, on the back of last year when the company paid a total of ₹1.50 to shareholders. Based on the last year's worth of payments, SIL Investments stock has a trailing yield of around 1.0% on the current share price of ₹147.15. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether SIL Investments has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for SIL Investments
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. SIL Investments has a low and conservative payout ratio of just 5.9% of its income after tax.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
Click here to see how much of its profit SIL Investments paid out over the last 12 months.
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. For this reason, we're glad to see SIL Investments's earnings per share have risen 18% per annum over the last five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. SIL Investments has delivered 4.1% dividend growth per year on average over the past 10 years. 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.
Final Takeaway
Has SIL Investments got what it takes to maintain its dividend payments? Companies like SIL Investments that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. We think this is a pretty attractive combination, and would be interested in investigating SIL Investments more closely.