Remsons Industries (NSE:REMSONSIND) Is Increasing Its Dividend To ₹1.50

Remsons Industries Limited (NSE:REMSONSIND) has announced that it will be increasing its dividend from last year's comparable payment on the 15th of October to ₹1.50. Although the dividend is now higher, the yield is only 0.4%, which is below the industry average.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Remsons Industries' stock price has increased by 64% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

Check out our latest analysis for Remsons Industries

Remsons Industries' Payment Has Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, Remsons Industries was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS could expand by 12.8% if recent trends continue. If the dividend continues on this path, the payout ratio could be 9.5% by next year, which we think can be pretty sustainable going forward.

Remsons Industries' Dividend Has Lacked Consistency

Remsons Industries has been paying dividends for a while, but the track record isn't stellar. This suggests that the dividend might not be the most reliable. The annual payment during the last 5 years was ₹1.30 in 2018, and the most recent fiscal year payment was ₹1.50. This works out to be a compound annual growth rate (CAGR) of approximately 2.9% a year over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Remsons Industries has been growing its earnings per share at 13% a year over the past five years. Remsons Industries definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like Remsons Industries' Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 4 warning signs for Remsons Industries (of which 1 is concerning!) you should know about. Is Remsons Industries not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.