It looks like Coforge Limited (NSE:COFORGE) is about to go ex-dividend in the next 2 days. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. This means that investors who purchase Coforge's shares on or after the 3rd of August will not receive the dividend, which will be paid on the 26th of August.
The company's next dividend payment will be ₹4.00 per share. Last year, in total, the company distributed ₹16.00 to shareholders. Based on the last year's worth of payments, Coforge has a trailing yield of 0.9% on the current stock price of ₹1746.90. If you buy this business for its dividend, you should have an idea of whether Coforge's dividend is reliable and sustainable. So we need to investigate whether Coforge can afford its dividend, and if the dividend could grow.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. 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 more than half (50%) of its free cash flow in the past year, which is within an average range for most companies.
Check out our latest analysis for Coforge
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 earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Coforge's earnings have been skyrocketing, up 22% per annum for the past five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Coforge has delivered an average of 23% per year annual increase in its dividend, based on the past 10 years of dividend payments. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
The Bottom Line
Should investors buy Coforge for the upcoming dividend? From a dividend perspective, we're encouraged to see that earnings per share have been growing, the company is paying out less than half of its earnings, and a bit over half its free cash flow. Coforge looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
In light of that, while Coforge has an appealing dividend, it's worth knowing the risks involved with this stock. Be aware that Coforge is showing 2 warning signs in our investment analysis, and 1 of those makes us a bit uncomfortable...
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.