Readers hoping to buy Subros Limited (NSE:SUBROS) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. You can purchase shares before the 31st of July in order to receive the dividend, which the company will pay on the 8th of September.

Subros's next dividend payment will be ₹1.30 per share, and in the last 12 months, the company paid a total of ₹1.30 per share. Based on the last year's worth of payments, Subros stock has a trailing yield of around 0.7% on the current share price of ₹189.25. 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 Subros can afford its dividend, and if the dividend could grow.

See our latest analysis for Subros

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. Subros has a low and conservative payout ratio of just 11% of its income after tax.

Click here to see how much of its profit Subros 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. That's why it's comforting to see Subros's earnings have been skyrocketing, up 29% per annum for the past five years. Subros looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Subros has delivered an average of 10% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

The Bottom Line

Should investors buy Subros for the upcoming dividend? It's great that Subros 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. Subros looks solid on this analysis overall, and we'd definitely consider investigating it more closely.