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Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Navneet Education Limited (NSE:NAVNETEDUL) is about to trade ex-dividend in the next 2 days. You will need to purchase shares before the 15th of July to receive the dividend, which will be paid on the 23rd of August.
Navneet Education's upcoming dividend is ₹1.00 a share, following on from the last 12 months, when the company distributed a total of ₹1.00 per share to shareholders. Calculating the last year's worth of payments shows that Navneet Education has a trailing yield of 0.9% on the current share price of ₹106.7. 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! As a result, readers should always check whether Navneet Education has been able to grow its dividends, or if the dividend might be cut.
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. Navneet Education paid out just 15% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether Navneet Education generated enough free cash flow to afford its dividend. Dividends consumed 68% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.
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.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Navneet Education earnings per share are up 6.4% per annum over the last five years.
Decent historical earnings per share growth suggests Navneet Education has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. It looks like the Navneet Education dividends are largely the same as they were ten years ago.
To Sum It Up
Is Navneet Education an attractive dividend stock, or better left on the shelf? Earnings per share have been growing at a steady rate, and Navneet Education 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 Navneet Education from a dividend perspective.
Ever wonder what the future holds for Navneet Education? See what the three analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.