CARE Ratings Limited (NSE:CARERATING) stock is about to trade ex-dividend in 3 days time. Investors can purchase shares before the 19th of August in order to be eligible for this dividend, which will be paid on the 30th of August.

CARE Ratings's next dividend payment will be ₹3.00 per share, and in the last 12 months, the company paid a total of ₹30.00 per share. Last year's total dividend payments show that CARE Ratings has a trailing yield of 5.3% on the current share price of ₹561.85. If you buy this business for its dividend, you should have an idea of whether CARE Ratings's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for CARE Ratings

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. CARE Ratings is paying out an acceptable 63% of its profit, a common payout level among most companies.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

Click here to see how much of its profit CARE Ratings paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's not encouraging to see that CARE Ratings's earnings are effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 6 years, CARE Ratings has increased its dividend at approximately 3.8% a year on average.

The Bottom Line

Is CARE Ratings worth buying for its dividend? Earnings per share have not grown at all, and the company pays out a bit over half its profits to shareholders. All things considered, we're not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.

Want to learn more about CARE Ratings? Here's a visualisation of its historical rate of revenue and earnings growth.

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.