Sandhar Technologies (NSE:SANDHAR) Has Announced That It Will Be Increasing Its Dividend To ₹2.25

Sandhar Technologies Limited (NSE:SANDHAR) has announced that it will be increasing its dividend from last year's comparable payment on the 22nd of October to ₹2.25. This takes the dividend yield to 0.9%, which shareholders will be pleased with.

Check out our latest analysis for Sandhar Technologies

Sandhar Technologies' Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Sandhar Technologies' earnings easily covered the dividend, but free cash flows were negative. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

The next year is set to see EPS grow by 41.9%. 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.

Sandhar Technologies' Dividend Has Lacked Consistency

Even in its short history, we have seen the dividend cut. The annual payment during the last 4 years was ₹2.50 in 2018, and the most recent fiscal year payment was ₹2.25. Doing the maths, this is a decline of about 2.6% per year. A company that decreases its dividend over time generally isn't what we are looking for.

We Could See Sandhar Technologies' Dividend Growing

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. We are encouraged to see that Sandhar Technologies has grown earnings per share at 5.4% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Sandhar Technologies' payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 4 warning signs for Sandhar Technologies (of which 1 is a bit concerning!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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