Sandhar Technologies (NSE:SANDHAR) Is Paying Out A Larger Dividend Than Last Year

The board of Sandhar Technologies Limited (NSE:SANDHAR) has announced that it will be paying its dividend of ₹2.50 on the 21st of October, an increased payment from last year's comparable dividend. Even though the dividend went up, the yield is still quite low at only 0.6%.

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 Sandhar Technologies' stock price has increased by 57% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

See our latest analysis for Sandhar Technologies

Sandhar Technologies' Dividend Is Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. However, Sandhar Technologies' earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 36.8%. Assuming the dividend continues along recent trends, we think the payout ratio could be 14% by next year, which is in a pretty sustainable range.

Sandhar Technologies' Dividend Has Lacked Consistency

It's comforting to see that Sandhar Technologies has been paying a dividend for a number of years now, however it has been cut at least once in that time. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The payments haven't really changed that much since 5 years ago. 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's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Although it's important to note that Sandhar Technologies' earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. While growth may be thin on the ground, Sandhar Technologies could always pay out a higher proportion of earnings to increase shareholder returns.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. 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.

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. Taking the debate a bit further, we've identified 2 warning signs for Sandhar Technologies that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.