Shriram Pistons & Rings (NSE:SHRIPISTON) Is Due To Pay A Dividend Of ₹5.00

The board of Shriram Pistons & Rings Limited (NSE:SHRIPISTON) has announced that it will pay a dividend on the 31st of August, with investors receiving ₹5.00 per share. The dividend yield is 0.5% based on this payment, which is a little bit low compared to the other companies in the industry.

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

Shriram Pistons & Rings' Projected Earnings Seem Likely To Cover Future Distributions

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, Shriram Pistons & Rings 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.

If the trend of the last few years continues, EPS will grow by 47.8% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 6.6% by next year, which is in a pretty sustainable range.

View our latest analysis for Shriram Pistons & Rings

Shriram Pistons & Rings' Dividend Has Lacked Consistency

It's comforting to see that Shriram Pistons & Rings has been paying a dividend for a number of years now, however it has been cut at least once in that time. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The dividend has gone from an annual total of ₹4.00 in 2017 to the most recent total annual payment of ₹10.00. This means that it has been growing its distributions at 12% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Shriram Pistons & Rings has impressed us by growing EPS at 48% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

Shriram Pistons & Rings Looks Like A Great Dividend Stock

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. Taking the debate a bit further, we've identified 1 warning sign for Shriram Pistons & Rings that investors need to be conscious of moving forward. Is Shriram Pistons & Rings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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