Ganesha Ecosphere Limited (NSE:GANECOS) Passed Our Checks, And It's About To Pay A 0.8% Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Ganesha Ecosphere Limited (NSE:GANECOS) is about to trade ex-dividend in the next 3 days. Investors can purchase shares before the 28th of August in order to be eligible for this dividend, which will be paid on the 5th of October.
Ganesha Ecosphere's upcoming dividend is ₹2.00 a share, following on from the last 12 months, when the company distributed a total of ₹2.00 per share to shareholders. Last year's total dividend payments show that Ganesha Ecosphere has a trailing yield of 0.8% on the current share price of ₹250.05. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
See our latest analysis for Ganesha Ecosphere
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Ganesha Ecosphere paid out just 6.5% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. The good news is it paid out just 5.8% of its free cash flow in the last year.
It's positive to see that Ganesha Ecosphere'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.
Click here to see how much of its profit Ganesha Ecosphere 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. For this reason, we're glad to see Ganesha Ecosphere's earnings per share have risen 13% per annum over the last five years. Earnings per share are growing rapidly and the company is keeping more than half of its earnings within the business; an attractive combination which could suggest the company is focused on reinvesting to grow earnings further. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.
Ganesha Ecosphere also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Ganesha Ecosphere has lifted its dividend by approximately 7.2% a year on average. 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
Has Ganesha Ecosphere got what it takes to maintain its dividend payments? Ganesha Ecosphere has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. Ganesha Ecosphere looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
Want to learn more about Ganesha Ecosphere's dividend performance? Check out this visualisation of its historical revenue and earnings growth.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
