Regular readers will know we love our dividends at Simply Wall St, which is why it’s exciting to see Newgen Software Technologies Limited (NSE: NEWGEN) 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. This means that you will have to buy shares of Newgen Software Technologies before July 15 to receive the dividend, which will be paid on August 10.
The company’s next dividend will be 3.50.50 per share, and over the past 12 months, the company has paid a total of 3.50 per share. Looking at the last 12 months of distributions, Newgen Software Technologies has a rolling return of approximately 0.5% on its current price of 703.45. Dividends are a major contributor to returns on investment for long-term holders, but only if the dividend continues to be paid. You have to see if the dividend is covered by profits and if it increases.
Check out our latest review for Newgen Software Technologies
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. Newgen Software Technologies only paid 19% of its profits last year, which in our opinion is moderately low and leaves a lot of room for unexpected circumstances. A useful secondary check may be to assess whether Newgen Software Technologies has generated sufficient free cash flow to pay its dividend. Fortunately, he only paid 6.9% of his free cash flow last 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 view the company’s payout ratio, as well as analysts’ estimates of its future dividends.
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. If profits fall and the company is forced to cut its dividend, investors could see the value of their investment go up in smoke. It is encouraging to see that Newgen Software Technologies has grown its profits rapidly, increasing by 28% per year over the past five years. Newgen Software Technologies looks like a real growth company, with rapidly growing earnings per share and the company reinvesting most of its profits back into the company.
Most investors primarily assess a company’s dividend prospects by checking the historical rate of dividend growth. Newgen Software Technologies has recorded dividend growth of 21% per year on average over the past three years. It’s great to see earnings per share increasing rapidly over several years, and dividends per share increasing at the same time.
Does Newgen Software Technologies have what it takes to maintain its dividend payments? Newgen Software Technologies increased earnings per share while reinvesting in the business. Unfortunately, the dividend has been reduced at least once in the past three years, but the conservative payout ratio makes the current dividend look sustainable. It is a promising combination that should mark this company worthy of further attention.
On that note, you’ll want to research the risks that Newgen Software Technologies faces. In terms of investment risks, we have identified 3 warning signs with Newgen Software Technologies and understanding them should be part of your investment process.
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. 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 any of the stocks mentioned.
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