Bhageria Industries Limited (NSE:BHAGIL) is about to trade ex-dividend in the next 3 days. This means that investors who purchase shares on or after the 23rd of August will not receive the dividend, which will be paid on the 30th of September.

Bhageria Industries's next dividend payment will be ₹2.25 per share, and in the last 12 months, the company paid a total of ₹2.25 per share. Based on the last year's worth of payments, Bhageria Industries has a trailing yield of 2.1% on the current stock price of ₹106.2. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Bhageria Industries

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. Bhageria Industries is paying out just 19% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. 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 19% of its free cash flow last year.

It's positive to see that Bhageria Industries'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 Bhageria Industries 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. 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 encouraging to see Bhageria Industries has grown its earnings rapidly, up 27% a year for the past five years. Bhageria Industries 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.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Bhageria Industries has increased its dividend at approximately 31% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.