Steel Strips Wheels (NSE:SSWL) Has Announced That It Will Be Increasing Its Dividend To ₹1.25

Steel Strips Wheels Limited (NSE:SSWL) will increase its dividend from last year's comparable payment on the 30th of October to ₹1.25. The payment will take the dividend yield to 0.6%, which is in line with the average for the industry.

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Steel Strips Wheels' Future Dividend Projections Appear Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. However, Steel Strips Wheels' earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 26.5%. If the dividend continues on this path, the payout ratio could be 9.2% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for Steel Strips Wheels

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the annual payment back then was ₹0.15, compared to the most recent full-year payment of ₹1.25. This implies that the company grew its distributions at a yearly rate of about 24% over that duration. Steel Strips Wheels has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Steel Strips Wheels has grown earnings per share at 40% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

Steel Strips Wheels Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic 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 3 warning signs for Steel Strips Wheels that you should be aware of before investing. Is Steel Strips Wheels 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.