Worth Peripherals Limited (NSE:WORTH) is about to trade ex-dividend in the next 3 days. You will need to purchase shares before the 6th of August to receive the dividend, which will be paid on the 13th of September.
Worth Peripherals's upcoming dividend is ₹0.90 a share, following on from the last 12 months, when the company distributed a total of ₹1.80 per share to shareholders. Based on the last year's worth of payments, Worth Peripherals has a trailing yield of 3.8% on the current stock price of ₹47. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Worth Peripherals has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for Worth Peripherals
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. Worth Peripherals has a low and conservative payout ratio of just 18% of its income after tax. 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. It paid out 3.2% 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 Worth Peripherals 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. Fortunately for readers, Worth Peripherals's earnings per share have been growing at 13% a year for the past five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.
We'd also point out that Worth Peripherals issued a meaningful number of new shares in the past year. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.