Cantabil Retail India Limited (NSE:CANTABIL) stock is about to trade ex-dividend in three 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. This means that investors who purchase Cantabil Retail India’s shares on or after the 15th of September will not receive the dividend, which will be paid on the 23rd of October.
The company’s upcoming dividend is ₹1.50 a share, following on from the last 12 months, when the company distributed a total of ₹3.00 per share to shareholders. Based on the last year’s worth of payments, Cantabil Retail India has a trailing yield of 0.2% on the current stock price of ₹1526.85. If you buy this business for its dividend, you should have an idea of whether Cantabil Retail India’s dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it’s growing.
Check out our latest analysis for Cantabil Retail India
If a company pays out more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. Cantabil Retail India has a low and conservative payout ratio of just 7.6% of its income after tax. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Luckily it paid out just 3.6% of its free cash flow last year.
It’s positive to see that Cantabil Retail India’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 Cantabil Retail India paid out over the last 12 months.
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 Cantabil Retail India has grown its earnings rapidly, up 68% a year for the past five years. Cantabil Retail India looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.
Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. Cantabil Retail India has delivered 73% dividend growth per year on average over the past two years. It’s great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
Final Takeaway
Is Cantabil Retail India worth buying for its dividend? We love that Cantabil Retail India is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. Overall we think this is an attractive combination and worthy of further research.
While it’s tempting to invest in Cantabil Retail India for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we’ve spotted 1 warning sign for Cantabil Retail India you should know about.
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.
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