Is It Smart To Buy Tata Metaliks Limited (NSE:TATAMETALI) Before It Goes Ex-Dividend?
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Tata Metaliks Limited (NSE:TATAMETALI) is about to trade ex-dividend in the next 3 days. You can purchase shares before the 16th of August in order to receive the dividend, which the company will pay on the 26th of September.
Tata Metaliks's next dividend payment will be ₹3.50 per share, and in the last 12 months, the company paid a total of ₹3.50 per share. Calculating the last year's worth of payments shows that Tata Metaliks has a trailing yield of 0.7% on the current share price of ₹505.05. If you buy this business for its dividend, you should have an idea of whether Tata Metaliks's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
See our latest analysis for Tata Metaliks
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Tata Metaliks is paying out just 5.3% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. A useful secondary check can be to evaluate whether Tata Metaliks generated enough free cash flow to afford its dividend. It paid out 2.6% of its free cash flow as dividends last year, which is conservatively low.
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.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Tata Metaliks has grown its earnings rapidly, up 35% a year for the past five years. Tata Metaliks earnings per share have been sprinting ahead like the Road Runner at a track and field day; scarcely stopping even for a cheeky "beep-beep". We also like that it is reinvesting most of its profits in its business.
Tata Metaliks 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 3 years, Tata Metaliks has lifted its dividend by approximately 21% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
The Bottom Line
Is Tata Metaliks worth buying for its dividend? Tata Metaliks 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. Tata Metaliks looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
Wondering what the future holds for Tata Metaliks? See what the two analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
If you're in the market for dividend stocks, we recommend checking our list of top 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 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.
