Sharda Motor Industries (NSE:SHARDAMOTR) Is Paying Out Less In Dividends Than Last Year

Sharda Motor Industries Limited's (NSE:SHARDAMOTR) dividend is being reduced from last year's payment covering the same period to ₹9.92 on the 26th of October. This means that the annual payment is 0.4% of the current stock price, which is lower than what the rest of the industry is paying.

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 Sharda Motor Industries' stock price has increased by 63% 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 Sharda Motor Industries

Sharda Motor Industries' Future Dividend Projections Appear Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. However, Sharda Motor Industries' earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

If the trend of the last few years continues, EPS will grow by 30.1% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 8.4% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was ₹2.00 in 2014, and the most recent fiscal year payment was ₹9.92. This works out to be a compound annual growth rate (CAGR) of approximately 17% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Sharda Motor Industries has impressed us by growing EPS at 30% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

We Really Like Sharda Motor Industries' Dividend

Overall, we think that Sharda Motor Industries could be a great option for a dividend investment, although we would have preferred if the dividend wasn't cut this year. By reducing the dividend, pressure will be taken off the balance sheet, which could help the dividend to be consistent in the future. All in all, this checks a lot of the boxes we look for when choosing an income stock.

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 picked out 2 warning signs for Sharda Motor Industries that investors should know about before committing capital to this stock. Is Sharda Motor Industries 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.