Clean Science and Technology Limited (NSE:CLEAN) is about to trade ex-dividend in the next 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 because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. This means that investors who purchase Clean Science and Technology's shares on or after the 4th of September will not receive the dividend, which will be paid on the 30th of September.
The company's next dividend payment will be ₹4.00 per share. Last year, in total, the company distributed ₹6.00 to shareholders. Last year's total dividend payments show that Clean Science and Technology has a trailing yield of 0.7% on the current share price of ₹836.45. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Clean Science and Technology can afford its dividend, and if the dividend could grow.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. That's why it's good to see Clean Science and Technology paying out a modest 28% of its earnings. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Over the last year, it paid out more than three-quarters (87%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.
It's positive to see that Clean Science and Technology'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.
Check out our latest analysis for Clean Science and Technology
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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see Clean Science and Technology earnings per share are up 3.3% per annum over the last five years. A high payout ratio of 28% generally happens when a company can't find better uses for the cash. Combined with slim earnings growth in the past few years, Clean Science and Technology could be signalling that its future growth prospects are thin.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Clean Science and Technology has delivered 17% dividend growth per year on average over the past four years. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
To Sum It Up
Should investors buy Clean Science and Technology for the upcoming dividend? Earnings per share have been growing at a steady rate, and Clean Science and Technology paid out less than half its profits and more than half its free cash flow as dividends over the last year. In summary, it's hard to get excited about Clean Science and Technology from a dividend perspective.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Case in point: We've spotted 1 warning sign for Clean Science and Technology you should be aware of.
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.