Sarla Performance Fibers Limited (NSE:SARLAPOLY) Looks Interesting, And It’s About To Pay A Dividend

Sarla Performance Fibers Limited (NSE:SARLAPOLY) stock is about to trade ex-dividend in 3 days. The ex-dividend date occurs one day 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. This means that investors who purchase Sarla Performance Fibers’ shares on or after the 20th of September will not receive the dividend, which will be paid on the 28th of October.

The company’s next dividend payment will be ₹2.00 per share, and in the last 12 months, the company paid a total of ₹2.00 per share. Looking at the last 12 months of distributions, Sarla Performance Fibers has a trailing yield of approximately 3.5% on its current stock price of ₹56.65. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it’s growing.

Check out our latest analysis for Sarla Performance Fibers

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. Sarla Performance Fibers paid out a comfortable 37% of its profit last year.

Click here to see how much of its profit Sarla Performance Fibers 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. With that in mind, we’re encouraged by the steady growth at Sarla Performance Fibers, with earnings per share up 5.7% on average over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. We think this is generally an attractive combination, as dividends can grow through a combination of earnings growth and or a higher payout ratio over time.

The main way most investors will assess a company’s dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, Sarla Performance Fibers has lifted its dividend by approximately 16% a year on average. It’s encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

To Sum It Up

Is Sarla Performance Fibers an attractive dividend stock, or better left on the shelf? It has been growing its earnings per share somewhat in recent years, although it reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. In summary, Sarla Performance Fibers appears to have some promise as a dividend stock, and we’d suggest taking a closer look at it.

On that note, you’ll want to research what risks Sarla Performance Fibers is facing. To help with this, we’ve discovered 2 warning signs for Sarla Performance Fibers that you should be aware of before investing in their shares.

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.