Some investors rely on dividends to grow their wealth, and if you’re one of those dividend sleuths, you might be intrigued to know that Limited CARE assessments (NSE: CARERATING) is set to go ex-dividend in just 4 days. The ex-dividend date is one business day before the record date, which is the deadline by which shareholders must be present on the books of the company to be eligible for payment of a dividend. The ex-dividend date is important because each time a stock is bought or sold, the transaction takes at least two business days to settle. This means that investors who buy CARE Ratings shares on or after September 13 will not receive the dividend, which will be paid on October 25.

The company’s next dividend payment will be ₹10.00 per share. Last year, in total, the company distributed ₹17.00 to shareholders. Calculating the value of last year’s payments shows that CARE Ratings has a yield of 3.4% on the current share price of ₹498.75. Dividends contribute greatly to investment returns for long-term holders, but only if the dividend continues to be paid. We need to see if the dividend is covered by earnings and if it increases.

Check out our latest analysis for CARE ratings

Dividends are usually paid out of company profits. If a company pays out more dividends than it earns in profits, then the dividend could be unsustainable. CARE Ratings paid out 65% of its profits to investors last year, a normal level of payout for most companies.

Companies that pay less in dividends than they earn in profits generally have longer-lasting dividends. The lower the payout ratio, the more leeway the company has before being forced to cut the dividend.

Click here to see the company’s payout ratio, as well as analysts’ estimates of its future dividends.

Have earnings and dividends increased?

When earnings decline, dividend companies become much more difficult to analyze and to own safely. If business goes into a recession and the dividend is cut, the company could see its value drop precipitously. With that in mind, we are bothered by CARE Ratings’ revenue decline of 12% per year over the past five years. When earnings per share decrease, the maximum amount of dividends that can be paid also decreases.

Most investors primarily gauge a company’s dividend prospects by checking the historical rate of dividend growth. CARE Ratings has recorded dividend growth of 3.5% per year on average over the past 10 years. Raising the dividend payout ratio as earnings decline can deliver good returns for a while, but it’s always worth checking to see if the company can’t raise the payout ratio any further – because then the music stops. .

The essential

Is CARE Ratings an attractive dividend stock, or is it better left on the shelf? Earnings per share are down and the company pays more than half of its profits to shareholders; not a tempting combination. These characteristics generally do not lead to exceptional dividend performance, and investors may not be satisfied with the results of owning this stock for its dividend.

So if you’re still interested in CARE ratings despite its low dividend qualities, you should be well-informed about some of the risks this stock faces. For example, we found 1 warning sign for CARE ratings which we recommend you consider before investing in the company.

If you are looking for good dividend payers, we recommend by consulting our selection of the best dividend-paying stocks.

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.