Eicher Motors (NSE:EICHERMOT) Is Increasing Its Dividend To ₹21.00

Eicher Motors Limited (NSE:EICHERMOT) has announced that it will be increasing its dividend from last year's comparable payment on the 23rd of September to ₹21.00. Despite this raise, the dividend yield of 0.7% is only a modest boost to shareholder returns.

Check out our latest analysis for Eicher Motors

Eicher Motors' Dividend Is Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Before making this announcement, Eicher Motors was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

The next year is set to see EPS grow by 133.2%. If the dividend continues on this path, the payout ratio could be 15% by next year, which we think can be pretty sustainable going forward.

Eicher Motors Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2012, the dividend has gone from ₹1.60 total annually to ₹21.00. This works out to be a compound annual growth rate (CAGR) of approximately 29% a year over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

Eicher Motors May Find It Hard To Grow The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, initial appearances might be deceiving. Unfortunately, Eicher Motors' earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

Our Thoughts On Eicher Motors' Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. While the payments look sustainable for now, earnings have been shrinking so the dividend could come under pressure in the future. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

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. Given that earnings are not growing, the dividend does not look nearly so attractive. See if the 32 analysts are forecasting a turnaround in our free collection of analyst estimates here. Is Eicher Motors not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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