Be sure to consult with National Aluminum Company Limited (NSE: NATIONALUM) before it becomes ex-dividend
Regular readers will know we love our dividends at Simply Wall St, which is why it’s exciting to see National Aluminum Company Limited (NSE: NATIONALUM) is set to trade ex-dividend within the next 3 days. Typically, the ex-dividend date is one business day prior to the record date which is the date a company determines which shareholders are eligible to receive a dividend. The ex-dividend date is important because every time a stock is bought or sold, the transaction takes at least two business days to settle. As a result, National Aluminum investors who buy the shares on or after September 23 will not receive the dividend, which will be paid on October 30.
The company’s next dividend payment will be 1.00 per share, and over the past 12 months, the company has paid a total of 3.50 per share. Calculating the value of last year’s payouts shows that National Aluminum has a 3.7% return on the current share price of 94.15. We love to see companies pay a dividend, but it’s also important to make sure that laying the golden eggs doesn’t kill our goose that lays the golden eggs! So we need to determine whether National Aluminum can afford its dividend and whether the dividend could increase.
Check out our latest review for National Aluminum
Dividends are usually paid out of the company’s profits, so if a company pays more than it earned, its dividend is usually at risk of being reduced. Fortunately, National Aluminum’s payout ratio is modest, at only 40% of profits. A useful secondary check may be to assess whether National Aluminum has generated enough free cash flow to pay its dividend. Fortunately, he has only paid out 47% of his free cash flow in the past year.
It is encouraging to see that the dividend is covered by both earnings and cash flow. This usually suggests that the dividend is sustainable, as long as profits don’t drop sharply.
Click here to see how much of its profits National Aluminum has paid in the past 12 months.
Have profits and dividends increased?
Stocks of companies that generate sustainable earnings growth often offer the best dividend prospects because it’s easier to raise the dividend when earnings rise. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold massively at the same time. It is encouraging to see that National Aluminum has grown its revenue rapidly, up 23% per year over the past five years. Earnings per share have grown very rapidly, and the company pays out a relatively small percentage of its earnings and cash flow. Companies with increasing profits and low payout ratios are often the best long-term dividend-paying stocks, as the company can both increase profits and increase the percentage of profits it pays out, essentially multiplying the dividend. .
Another key way to measure a company’s dividend outlook is to measure its historical rate of dividend growth. National Aluminum has generated dividend growth of 13% per year on average over the past 10 years. It’s great to see earnings per share increasing rapidly over several years, and dividends per share increasing at the same time.
From a dividend perspective, should investors buy or avoid National Aluminum? National Aluminum increased earnings per share while reinvesting in the business. Unfortunately, he has cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. There is a lot to like about National Aluminum, and we would prioritize taking a closer look.
In light of this, while National Aluminum has an attractive dividend, it is worth knowing the risks associated with this stock. Every business has risks, and we have spotted 3 warning signs for National Aluminum (1 of which is potentially serious!) that you should be aware of.
A common investment mistake is to buy the first interesting stock you see. Here you will find a list of promising dividend paying stocks with a yield above 2% and an upcoming dividend.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in the mentioned stocks.
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