Sundram Fasteners (NSE:SUNDRMFAST) Will Pay A Dividend Of ₹3.00

The board of Sundram Fasteners Limited (NSE:SUNDRMFAST) has announced that it will pay a dividend of ₹3.00 per share on the 3rd of December. Based on this payment, the dividend yield for the company will be 0.5%, which is fairly typical for the industry.

Check out our latest analysis for Sundram Fasteners

Sundram Fasteners' Future Dividend Projections Appear Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. Sundram Fasteners is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

The next year is set to see EPS grow by 22.2%. If the dividend continues on this path, the payout ratio could be 24% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the annual payment back then was ₹1.70, compared to the most recent full-year payment of ₹6.85. This means that it has been growing its distributions at 15% 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.

Sundram Fasteners Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Sundram Fasteners has seen EPS rising for the last five years, at 6.7% per annum. Sundram Fasteners definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On Sundram Fasteners' Dividend

In summary, while it's always good to see the dividend being raised, we don't think Sundram Fasteners' payments are rock solid. While Sundram Fasteners is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Sundram Fasteners 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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