Suprajit Engineering (NSE:SUPRAJIT) Is Increasing Its Dividend To ₹1.05

Suprajit Engineering Limited (NSE:SUPRAJIT) has announced that it will be increasing its periodic dividend on the 15th of March to ₹1.05, which will be 17% higher than last year's comparable payment amount of ₹0.90. The payment will take the dividend yield to 0.6%, which is in line with the average for the industry.

View our latest analysis for Suprajit Engineering

Suprajit Engineering's Payment Has Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. However, prior to this announcement, Suprajit Engineering's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

The next year is set to see EPS grow by 119.3%. 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.

Suprajit Engineering Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2013, the dividend has gone from ₹0.70 total annually to ₹2.00. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

We Could See Suprajit Engineering's Dividend Growing

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that Suprajit Engineering has been growing its earnings per share at 5.2% a year over the past five years. Suprajit Engineering definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like Suprajit Engineering's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. 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 of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 Suprajit Engineering that investors need to be conscious of moving forward. Is Suprajit Engineering not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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