Sandhar Technologies (NSE:SANDHAR) Is Increasing Its Dividend To ₹3.25

Sandhar Technologies Limited (NSE:SANDHAR) will increase its dividend from last year's comparable payment on the 24th of October to ₹3.25. This makes the dividend yield about the same as the industry average at 0.5%.

See our latest analysis for Sandhar Technologies

Sandhar Technologies' Projected Earnings Seem Likely To Cover Future Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. However, prior to this announcement, Sandhar Technologies' dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

The next year is set to see EPS grow by 19.1%. If the dividend continues on this path, the payout ratio could be 14% by next year, which we think can be pretty sustainable going forward.

Sandhar Technologies' Dividend Has Lacked Consistency

Looking back, Sandhar Technologies' dividend hasn't been particularly consistent. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2018, the annual payment back then was ₹2.50, compared to the most recent full-year payment of ₹3.25. This works out to be a compound annual growth rate (CAGR) of approximately 4.5% 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.

Sandhar Technologies Could Grow Its Dividend

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 6.0% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Sandhar Technologies' prospects of growing its dividend payments in the future.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 warning signs for Sandhar Technologies that investors should know about before committing capital to this stock. 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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