Readers hoping to buy IRB Infrastructure Developers Limited (NSE:IRB) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Therefore, if you purchase IRB Infrastructure Developers' shares on or after the 5th of August, you won't be eligible to receive the dividend, when it is paid on the 28th of August.
The company's next dividend payment will be ₹0.05 per share, and in the last 12 months, the company paid a total of ₹0.20 per share. Last year's total dividend payments show that IRB Infrastructure Developers has a trailing yield of 1.0% on the current share price of ₹20.00. If you buy this business for its dividend, you should have an idea of whether IRB Infrastructure Developers's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. IRB Infrastructure Developers is paying out just 22% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. A useful secondary check can be to evaluate whether IRB Infrastructure Developers generated enough free cash flow to afford its dividend. The good news is it paid out just 9.3% of its free cash flow in the last year.
It's positive to see that IRB Infrastructure Developers'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.
View our latest analysis for IRB Infrastructure Developers
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 IRB Infrastructure Developers's earnings have been skyrocketing, up 37% per annum for the past five years. IRB Infrastructure Developers looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. It looks like the IRB Infrastructure Developers dividends are largely the same as they were 10 years ago.
To Sum It Up
Has IRB Infrastructure Developers got what it takes to maintain its dividend payments? IRB Infrastructure Developers has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. Overall we think this is an attractive combination and worthy of further research.
On that note, you'll want to research what risks IRB Infrastructure Developers is facing. Be aware that IRB Infrastructure Developers is showing 4 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.