Alicon Castalloy's (NSE:ALICON) Upcoming Dividend Will Be Larger Than Last Year's

Alicon Castalloy Limited's (NSE:ALICON) dividend will be increasing from last year's payment of the same period to ₹3.75 on 5th of October. The payment will take the dividend yield to 0.9%, which is in line with the average for the industry.

View our latest analysis for Alicon Castalloy

Alicon Castalloy's Dividend Is Well Covered By Earnings

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Based on the last payment, Alicon Castalloy was paying only paying out a fraction of earnings, but the payment was a massive 242% of cash flows. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

Over the next year, EPS is forecast to expand by 43.0%. If the dividend continues on this path, the payout ratio could be 14% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of ₹1.38 in 2013 to the most recent total annual payment of ₹7.50. This implies that the company grew its distributions at a yearly rate of about 18% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

Alicon Castalloy May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Alicon Castalloy hasn't seen much change in its earnings per share over the last five years.

The Dividend Could Prove To Be Unreliable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Alicon Castalloy is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 3 warning signs for Alicon Castalloy you should be aware of, and 1 of them is concerning. Looking for more high-yielding dividend ideas? Try our collection of 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.