Rane Brake Lining's (NSE:RBL) Dividend Will Be Increased To ₹25.00

By
Simply Wall St
Published
June 02, 2021
NSEI:RBL
Source: Shutterstock

Rane Brake Lining Limited's (NSE:RBL) dividend will be increasing to ₹25.00 on 4th of August. This makes the dividend yield 2.9%, which is above the industry average.

See our latest analysis for Rane Brake Lining

Rane Brake Lining's Earnings Easily Cover the Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. The last dividend was quite easily covered by Rane Brake Lining's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

If the trend of the last few years continues, EPS will grow by 4.4% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 64%, which is in the range that makes us comfortable with the sustainability of the dividend.

historic-dividend
NSEI:RBL Historic Dividend June 3rd 2021

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2011, the first annual payment was ₹4.50, compared to the most recent full-year payment of ₹25.00. This works out to be a compound annual growth rate (CAGR) of approximately 19% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

Dividend Growth May Be Hard To Achieve

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. However, Rane Brake Lining has only grown its earnings per share at 4.4% per annum over the past five years. Growth of 4.4% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

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. For example, we've identified 3 warning signs for Rane Brake Lining (1 is a bit unpleasant!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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