Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Apar Industries Limited (NSE:APARINDS) is about to trade ex-dividend in the next 3 days. This means that investors who purchase shares on or after the 31st of July will not receive the dividend, which will be paid on the 7th of September.

Apar Industries's upcoming dividend is ₹9.50 a share, following on from the last 12 months, when the company distributed a total of ₹9.50 per share to shareholders. Last year's total dividend payments show that Apar Industries has a trailing yield of 1.8% on the current share price of ₹525. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Apar Industries can afford its dividend, and if the dividend could grow.

See our latest analysis for Apar Industries

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Fortunately Apar Industries's payout ratio is modest, at just 27% of profit. A useful secondary check can be to evaluate whether Apar Industries generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 8.6% of its cash flow last year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Apar Industries earnings per share are up 8.8% per annum 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.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Apar Industries has lifted its dividend by approximately 11% 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.