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Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Central Depository Services (India) Limited (NSE:CDSL) is about to trade ex-dividend in the next 3 days. If you purchase the stock on or after the 6th of September, you won't be eligible to receive this dividend, when it is paid on the 16th of October.
Central Depository Services (India)'s next dividend payment will be ₹4.00 per share. Last year, in total, the company distributed ₹4.00 to shareholders. Based on the last year's worth of payments, Central Depository Services (India) has a trailing yield of 2.0% on the current stock price of ₹195.35. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Central Depository Services (India) can afford its dividend, and if the dividend could grow.
View our latest analysis for Central Depository Services (India)
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Central Depository Services (India) paid out a comfortable 35% of its profit last year.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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 earnings fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see Central Depository Services (India)'s earnings per share have risen 20% per annum over the last five years.
Unfortunately Central Depository Services (India) has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.
The Bottom Line
From a dividend perspective, should investors buy or avoid Central Depository Services (India)? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. Overall, Central Depository Services (India) looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.