Advanced Enzyme Technologies (NSE:ADVENZYMES) Could Be A Buy For Its Upcoming Dividend – Simply Wall St
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Advanced Enzyme Technologies Limited (NSE:ADVENZYMES) is about to go ex-dividend in just three days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase Advanced Enzyme Technologies' shares on or after the 11th of August, you won't be eligible to receive the dividend, when it is paid on the 18th of September.
The company's upcoming dividend is ₹1.00 a share, following on from the last 12 months, when the company distributed a total of ₹1.00 per share to shareholders. Based on the last year's worth of payments, Advanced Enzyme Technologies stock has a trailing yield of around 0.3% on the current share price of ₹292.7. 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 check whether the dividend payments are covered, and if earnings are growing.
Check out our latest analysis for Advanced Enzyme Technologies
If a company pays out more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. Advanced Enzyme Technologies has a low and conservative payout ratio of just 9.3% of its income after tax. 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. Luckily it paid out just 11% of its free cash flow last year.
It's positive to see that Advanced Enzyme Technologies's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see how much of its profit Advanced Enzyme Technologies paid out over the last 12 months.
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Advanced Enzyme Technologies earnings per share are up 5.3% per annum over the last five years. Earnings per share have been growing at a decent rate, and the company is retaining more than three-quarters of its earnings in the business. This is an attractive combination, because when profits are reinvested effectively, growth can compound, with corresponding benefits for earnings and dividends in the future.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past five years, Advanced Enzyme Technologies has increased its dividend at approximately 20% 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.
Has Advanced Enzyme Technologies got what it takes to maintain its dividend payments? Earnings per share have been growing moderately, and Advanced Enzyme Technologies is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Advanced Enzyme Technologies is halfway there. Advanced Enzyme Technologies looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
Want to learn more about Advanced Enzyme Technologies? Here's a visualisation of its historical rate of revenue and earnings growth.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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Advanced Enzyme Technologies Limited researches and develops, manufactures, and markets enzymes and probiotics in India, the United States, Asia, Europe, and internationally.
Flawless balance sheet with questionable track record.
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