CIE Automotive India's (NSE:CIEINDIA) Upcoming Dividend Will Be Larger Than Last Year's

CIE Automotive India Limited's (NSE:CIEINDIA) dividend will be increasing from last year's payment of the same period to ₹5.00 on 20th of July. This will take the dividend yield to an attractive 1.1%, providing a nice boost to shareholder returns.

See our latest analysis for CIE Automotive India

CIE Automotive India's Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, CIE Automotive India was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 45.5% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 16%, which is in the range that makes us comfortable with the sustainability of the dividend.

CIE Automotive India Is Still Building Its Track Record

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 2 years, which isn't that long in the grand scheme of things. Since 2022, the dividend has gone from ₹2.50 total annually to ₹5.00. This means that it has been growing its distributions at 41% per annum over that time. CIE Automotive India has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

CIE Automotive India Could Grow Its Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that CIE Automotive India has been growing its earnings per share at 7.7% a year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 2 warning signs for CIE Automotive India that investors should take into consideration. Is CIE Automotive India not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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