Exide Industries (NSE:EXIDEIND) Has Announced A Dividend Of ₹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 means that the annual payment will be 0.5% of the current stock price, which is in line with the average for the industry.

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Exide Industries' Payment Could Potentially Have Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much. Prior to this announcement, Exide Industries' earnings easily covered the dividend, but free cash flows were negative. 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 99.6% over the next year. If the dividend continues on this path, the payout ratio could be 10% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for Exide Industries

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the annual payment back then was ₹2.20, compared to the most recent full-year payment of ₹2.00. The dividend has shrunk at a rate of less than 1% a year over this period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth May Be Hard To Achieve

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Unfortunately, Exide Industries' earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.

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 the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Exide Industries that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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