Sandhar Technologies (NSE:SANDHAR) Is Increasing Its Dividend To ₹2.25

Sandhar Technologies Limited (NSE:SANDHAR) will increase 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' Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Sandhar Technologies is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Looking forward, earnings per share is forecast to rise by 35.6% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 15% by next year, which is in a pretty sustainable range.

Sandhar Technologies' Dividend Has Lacked Consistency

Even in its short history, we have seen the dividend cut. Since 2018, the dividend has gone from ₹2.50 total annually to ₹2.25. The dividend has shrunk at around 2.6% a year during that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Has Growth Potential

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Sandhar Technologies has impressed us by growing EPS at 6.4% per year over the past five years. Sandhar Technologies definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Sandhar Technologies is earning enough to cover the payments, the cash flows are lacking. We don't think Sandhar Technologies is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 3 warning signs for Sandhar Technologies (1 is a bit unpleasant!) that you should be aware of before investing. 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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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.