Kothari Sugars and Chemicals Limited (NSE:KOTARISUG) stock is about to trade ex-dividend in 3 days time. You will need to purchase shares before the 30th of July to receive the dividend, which will be paid on the 6th of September.

Kothari Sugars and Chemicals's next dividend payment will be ₹0.50 per share, on the back of last year when the company paid a total of ₹0.50 to shareholders. Looking at the last 12 months of distributions, Kothari Sugars and Chemicals has a trailing yield of approximately 5.3% on its current stock price of ₹9.45. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for Kothari Sugars and Chemicals

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. Fortunately Kothari Sugars and Chemicals's payout ratio is modest, at just 33% of profit.

Click here to see how much of its profit Kothari Sugars and Chemicals 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 earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Kothari Sugars and Chemicals has grown its earnings rapidly, up 29% a year for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Kothari Sugars and Chemicals's dividend payments are broadly unchanged compared to where they were five years ago.

To Sum It Up

Should investors buy Kothari Sugars and Chemicals for the upcoming dividend? It's great that Kothari Sugars and Chemicals is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. Kothari Sugars and Chemicals looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

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

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising 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.