Sandhar Technologies (NSE:SANDHAR) Will Pay A Larger Dividend Than Last Year At ₹3.25

The board of Sandhar Technologies Limited (NSE:SANDHAR) has announced that it will be paying its dividend of ₹3.25 on the 24th of October, an increased payment from last year's comparable dividend. Although the dividend is now higher, the yield is only 0.5%, which is below the industry average.

See our latest analysis for Sandhar Technologies

Sandhar Technologies' Payment Has Solid Earnings Coverage

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Before making this announcement, Sandhar Technologies was easily earning enough to 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 19.1%. 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

Looking back, Sandhar Technologies' dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. Since 2018, the dividend has gone from ₹2.50 total annually to ₹3.25. This works out to be a compound annual growth rate (CAGR) of approximately 4.5% a year over that time. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

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 seen EPS rising for the last five years, at 6.0% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. 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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 2 warning signs for Sandhar Technologies that you should be aware of before investing. 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.