Exide Industries' (NSE:EXIDEIND) Dividend Will Be ₹2.00

Exide Industries Limited's (NSE:EXIDEIND) investors are due to receive a payment of ₹2.00 per share on 25th of August. This payment means that the dividend yield will be 0.6%, which is around the industry average.

We've discovered 1 warning sign about Exide Industries. View them for free.

Exide Industries' Payment Could Potentially Have Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Exide Industries is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Looking forward, earnings per share is forecast to rise by 103.2% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 9.9%, which is in the range that makes us comfortable with the sustainability of the dividend.

Check out our latest analysis for Exide Industries

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the annual payment back then was ₹2.20, compared to the most recent full-year payment of ₹2.00. Payments have been decreasing at a very slow pace in this time period. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth May Be Hard To Achieve

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. However, Exide Industries' EPS was effectively flat over the past five years, which could stop the company from paying more every year. While EPS growth is quite low, Exide Industries has the option to increase the payout ratio to return more cash to shareholders.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While Exide Industries is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Exide Industries that you should be aware of before investing. Is Exide Industries not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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