Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that The Sandur Manganese & Iron Ores Limited (NSE:SANDUMA) is about to go ex-dividend in just 3 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. Accordingly, Sandur Manganese & Iron Ores investors that purchase the stock on or after the 12th of August will not receive the dividend, which will be paid on the 18th of September.
The company's next dividend payment will be ₹0.50 per share. Last year, in total, the company distributed ₹0.50 to shareholders. Based on the last year's worth of payments, Sandur Manganese & Iron Ores has a trailing yield of 0.2% on the current stock price of ₹205.37. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are 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. Sandur Manganese & Iron Ores paid out just 3.7% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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. Luckily it paid out just 2.1% of its free cash flow last year.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Check out our latest analysis for Sandur Manganese & Iron Ores
Click here to see how much of its profit Sandur Manganese & Iron Ores 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. If earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see Sandur Manganese & Iron Ores earnings per share are up 9.2% per annum over the last five years. Earnings per share have been increasing steadily and management is reinvesting almost all of the profits back into the business. If profits are reinvested effectively, this could be a bullish combination for future earnings and dividends.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Sandur Manganese & Iron Ores has delivered an average of 12% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
To Sum It Up
Is Sandur Manganese & Iron Ores an attractive dividend stock, or better left on the shelf? Earnings per share have been growing moderately, and Sandur Manganese & Iron Ores is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. It might be nice to see earnings growing faster, but Sandur Manganese & Iron Ores is being conservative with its dividend payouts and could still perform reasonably over the long run. There's a lot to like about Sandur Manganese & Iron Ores, and we would prioritise taking a closer look at it.
Keen to explore more data on Sandur Manganese & Iron Ores's financial performance? Check out our visualisation of its historical revenue and earnings growth.
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.