Should Income Investors Look At Computer Age Management Services Limited (NSE:CAMS) Before Its Ex-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 Computer Age Management Services Limited (NSE:CAMS) is about to go ex-dividend in just 3 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. In other words, investors can purchase Computer Age Management Services' shares before the 23rd of June in order to be eligible for the dividend, which will be paid on the 20th of July.
The company's next dividend payment will be ₹12.00 per share. Last year, in total, the company distributed ₹48.00 to shareholders. Based on the last year's worth of payments, Computer Age Management Services stock has a trailing yield of around 2.0% on the current share price of ₹2418.1. 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 Computer Age Management Services
If a company pays out more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. Computer Age Management Services is paying out an acceptable 66% of its profit, a common payout level among most companies. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Dividends consumed 73% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.
It's positive to see that Computer Age Management Services'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 the company's payout ratio, plus analyst estimates of its future dividends.
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. For this reason, we're glad to see Computer Age Management Services's earnings per share have risen 18% per annum over the last five years. Computer Age Management Services is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Computer Age Management Services has delivered 89% dividend growth per year on average over the past two years. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
Is Computer Age Management Services worth buying for its dividend? It's good to see earnings are growing, since all of the best dividend stocks grow their earnings meaningfully over the long run. That's why we're glad to see Computer Age Management Services's earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow – 66% and 73% respectively. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Computer Age Management Services's dividend merits.
In light of that, while Computer Age Management Services has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 1 warning sign for Computer Age Management Services and you should be aware of it before buying any shares.
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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