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Pokarna Limited (NSE:POKARNA) stock is about to trade ex-dividend in 3 days time. 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 14th of October.
Pokarna's next dividend payment will be ₹0.60 per share, and in the last 12 months, the company paid a total of ₹0.60 per share. Last year's total dividend payments show that Pokarna has a trailing yield of 0.5% on the current share price of ₹129.1. If you buy this business for its dividend, you should have an idea of whether Pokarna's dividend is reliable and sustainable. So we need to investigate whether Pokarna can afford its dividend, and if the dividend could grow.
Check out our latest analysis for Pokarna
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Pokarna paid out just 1.8% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It paid out 4.6% of its free cash flow as dividends last year, which is conservatively low.
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 how much of its profit Pokarna 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. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Pokarna has grown its earnings rapidly, up 54% a year for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, Pokarna looks like a promising growth company.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 5 years, Pokarna has lifted its dividend by approximately 8.4% 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.
The Bottom Line
Is Pokarna worth buying for its dividend? We love that Pokarna is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. Overall we think this is an attractive combination and worthy of further research.