TVS Srichakra's (NSE:TVSSRICHAK) Dividend Will Be Reduced To ₹16.89

TVS Srichakra Limited (NSE:TVSSRICHAK) is reducing its dividend from last year's comparable payment to ₹16.89 on the 17th of October. However, the dividend yield of 0.6% still remains in a typical range for the industry.

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TVS Srichakra's Projected Earnings Seem Likely To Cover Future Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. The last dividend was quite easily covered by TVS Srichakra's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

The next year is set to see EPS grow by 51.2%. If the dividend continues on this path, the payout ratio could be 29% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for TVS Srichakra

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of ₹33.80 in 2015 to the most recent total annual payment of ₹16.89. The dividend has shrunk at around 6.7% a year during that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Has Growth Potential

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. TVS Srichakra has seen EPS rising for the last five years, at 6.7% per annum. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

In Summary

Even though the dividend was cut this year, we think TVS Srichakra has the ability to make consistent payments in the future. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 3 warning signs for TVS Srichakra that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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