Sandhar Technologies (NSE:SANDHAR) Is 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 will take the annual payment to 1.0% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Sandhar Technologies

Sandhar Technologies' Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, Sandhar Technologies was earning enough to cover the dividend, but free cash flows weren't positive. 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 35.6%. If the dividend continues on this path, the payout ratio could be 16% by next year, which we think can be pretty sustainable going forward.

Sandhar Technologies' Dividend Has Lacked Consistency

The track record isn't the longest, but we are already seeing a bit of instability in the payments. The dividend has gone from an annual total of ₹2.50 in 2018 to the most recent total annual payment of ₹2.25. The dividend has shrunk at around 2.6% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.

We Could See Sandhar Technologies' Dividend Growing

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Sandhar Technologies has been growing its earnings per share at 5.4% a 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. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 4 warning signs for Sandhar Technologies (of which 1 is significant!) you should know about. Is Sandhar Technologies 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.