Asahi India Glass (NSE:ASAHIINDIA) Is Paying Out A Dividend Of ₹2.00

The board of Asahi India Glass Limited (NSE:ASAHIINDIA) has announced that it will pay a dividend on the 18th of October, with investors receiving ₹2.00 per share. This payment means the dividend yield will be 0.4%, which is below the average for the industry.

Check out our latest analysis for Asahi India Glass

Asahi India Glass' Payment Has Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. However, prior to this announcement, Asahi India Glass' dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 60.5% over the next year. If the dividend continues on this path, the payout ratio could be 9.3% by next year, which we think can be pretty sustainable going forward.

Asahi India Glass' Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2016, the dividend has gone from ₹0.60 total annually to ₹2.00. This implies that the company grew its distributions at a yearly rate of about 19% over that duration. Asahi India Glass has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Asahi India Glass has been growing its earnings per share at 14% a year over the past five years. Asahi India Glass definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Asahi India Glass Looks Like A Great Dividend Stock

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 2 warning signs for Asahi India Glass that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.