Suprajit Engineering (NSE:SUPRAJIT) Is Increasing Its Dividend To ₹1.25

Suprajit Engineering Limited (NSE:SUPRAJIT) will increase its dividend from last year's comparable payment on the 25th of October to ₹1.25. Despite this raise, the dividend yield of 0.5% is only a modest boost to shareholder returns.

View our latest analysis for Suprajit Engineering

Suprajit Engineering's Earnings Easily Cover The Distributions

If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, Suprajit Engineering 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.

The next year is set to see EPS grow by 98.6%. If the dividend continues on this path, the payout ratio could be 11% 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. The dividend has gone from an annual total of ₹0.70 in 2013 to the most recent total annual payment of ₹2.30. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

Dividend Growth May Be Hard To Achieve

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Although it's important to note that Suprajit Engineering's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. While EPS growth is quite low, Suprajit Engineering has the option to increase the payout ratio to return more cash to shareholders.

We Really Like Suprajit Engineering's Dividend

Overall, a dividend increase is always good, and we think that Suprajit Engineering is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend 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. Earnings growth generally bodes well for the future value of company dividend payments. See if the 8 Suprajit Engineering analysts we track are forecasting continued growth with our free report on analyst estimates for the company. 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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