Ahlada Engineers (NSE:AHLADA) Will Pay A Larger Dividend Than Last Year At ₹1.40

Ahlada Engineers Limited's (NSE:AHLADA) dividend will be increasing to ₹1.40 on 30th of October. This will take the dividend yield from 0.9% to 0.9%, providing a nice boost to shareholder returns.

View our latest analysis for Ahlada Engineers

Ahlada Engineers' Earnings Easily Cover the Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Ahlada Engineers 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.

If the trend of the last few years continues, EPS will grow by 19.7% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 14%, which is in the range that makes us comfortable with the sustainability of the dividend.

Ahlada Engineers Doesn't Have A Long Payment History

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 2 years, which isn't that long in the grand scheme of things. Since 2019, the first annual payment was ₹1.00, compared to the most recent full-year payment of ₹1.40. This means that it has been growing its distributions at 18% per annum over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Ahlada Engineers has grown earnings per share at 20% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Our Thoughts On Ahlada Engineers' Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

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. Case in point: We've spotted 4 warning signs for Ahlada Engineers (of which 1 is potentially serious!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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