Some investors rely on dividends to grow their wealth, and if you’re one of those dividend sleuths, you might be intrigued to know that Ashapura Minechem Limited (NSE: ASHAPURMIN) is set to go ex-dividend in just three days. The ex-dividend date is a business day before a company’s registration date, which is the date the company determines which shareholders are entitled to receive a dividend. It is important to know the ex-dividend date because any transaction in the share must have been settled by the registration date at the latest. Thus, you can buy the shares of Ashapura Minechem before September 21 in order to receive the dividend that the company will pay on October 29.
The upcoming dividend for Ashapura Minechem is 0.50 per share. Dividends are a major contributor to returns on investment for long-term holders, but only if the dividend continues to be paid. You have to see if the dividend is covered by profits and if it increases.
Check out our latest review for Ashapura Minechem
Dividends are usually paid out of the company’s profits, so if a company pays more than it earned, its dividend is usually at risk of being reduced. Ashapura Minechem only paid 3.9% of its profits last year, which in our opinion is moderately low and leaves a lot of room for unforeseen circumstances. Ashapura Minechem paid a dividend despite negative free cash flow last year. It’s usually a bad combination and – if it was more than a one-off – not sustainable.
Click here to see how much of its profits Ashapura Minechem paid in the last 12 months.
Have profits and dividends increased?
When profits fall, dividend companies become much more difficult to analyze and to safely own. If profits fall and the company is forced to cut its dividend, investors could see the value of their investment go up in smoke. Readers will then understand why we are concerned that Ashapura Minechem’s earnings per share have fallen 7.2% per year over the past five years. When earnings per share decrease, the maximum amount of dividends that can be paid also decreases.
This is the first year that Ashapura Minechem has paid a dividend, which is exciting for shareholders – but it means there is no dividend history to review.
The bottom line
Does Ashapura Minechem have what it takes to maintain its dividend payments? Earnings per share have declined significantly in recent years, although we like the fact that the company has a low payout ratio. This might suggest that a dividend cut might not be a major risk in the near future. Overall, Ashapura Minechem appears to be a promising dividend-paying stock in this analysis, and we think it would be worth studying further.
Although it is tempting to invest in Ashapura Minechem for dividends only, you should always be aware of the risks involved. For example, we found 5 warning signs for Ashapura Minechem (1 cannot be ignored!) That deserve your attention before investing in stocks.
A common investment mistake is to buy the first interesting stock you see. Here you will find a list of promising dividend paying stocks with a yield above 2% and an upcoming dividend.
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