It looks like Aartech Solonics Limited (NSE:AARTECH) is about to go ex-dividend in the next 3 days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a 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. Meaning, you will need to purchase Aartech Solonics' shares before the 22nd of September to receive the dividend, which will be paid on the 29th of October.
The company's next dividend payment will be ₹0.125 per share. Last year, in total, the company distributed ₹0.12 to shareholders. Calculating the last year's worth of payments shows that Aartech Solonics has a trailing yield of 0.2% on the current share price of ₹51.40. 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 Aartech Solonics has been able to grow its dividends, or if the dividend might be cut.
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. Aartech Solonics paid out just 10% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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.
See our latest analysis for Aartech Solonics
Click here to see how much of its profit Aartech Solonics 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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Aartech Solonics has grown its earnings rapidly, up 79% a year 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. Aartech Solonics has delivered 2.0% dividend growth per year on average over the past six years. Earnings per share have been growing much quicker than dividends, potentially because Aartech Solonics is keeping back more of its profits to grow the business.
The Bottom Line
Is Aartech Solonics worth buying for its dividend? We like that Aartech Solonics has been successfully growing its earnings per share at a nice rate and reinvesting most of its profits in the business. However, we note the high cashflow payout ratio with some concern. Overall, it's hard to get excited about Aartech Solonics from a dividend perspective.
So while Aartech Solonics looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example, we've found 3 warning signs for Aartech Solonics that we recommend you consider before investing in the business.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
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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.