Shriram Pistons & Rings (NSE:SHRIPISTON) Has Affirmed Its Dividend Of ₹5.00

Shriram Pistons & Rings Limited (NSE:SHRIPISTON) has announced that it will pay a dividend of ₹5.00 per share on the 31st of August. This payment means the dividend yield will be 0.4%, which is below the average for the industry.

We've discovered 1 warning sign about Shriram Pistons & Rings. View them for free.

Shriram Pistons & Rings' Payment Could Potentially Have Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, prior to this announcement, Shriram Pistons & Rings' dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 43.2% over the next year. If the dividend continues on this path, the payout ratio could be 6.9% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for Shriram Pistons & Rings

Shriram Pistons & Rings' Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The annual payment during the last 8 years was ₹4.00 in 2017, and the most recent fiscal year payment was ₹10.00. This works out to be a compound annual growth rate (CAGR) of approximately 12% 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 evaluate if earnings per share is growing, which could point to a growing dividend in the future. We are encouraged to see that Shriram Pistons & Rings has grown earnings per share at 48% 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.

Shriram Pistons & Rings Looks Like A Great Dividend Stock

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Shriram Pistons & Rings 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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