Cochin Shipyard (NSE:COCHINSHIP) Has Announced A Dividend Of ₹3.50

Cochin Shipyard Limited (NSE:COCHINSHIP) has announced that it will pay a dividend of ₹3.50 per share on the 7th of March. This payment means that the dividend yield will be 0.7%, which is around the industry average.

View our latest analysis for Cochin Shipyard

Cochin Shipyard's Projected Earnings Seem Likely To Cover Future Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Based on the last payment, Cochin Shipyard was earning enough to cover the dividend, but free cash flows weren't positive. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Over the next year, EPS is forecast to expand by 38.5%. Assuming the dividend continues along recent trends, we think the payout ratio could be 26% by next year, which is in a pretty sustainable range.

Cochin Shipyard's Dividend Has Lacked Consistency

It's comforting to see that Cochin Shipyard has been paying a dividend for a number of years now, however it has been cut at least once in that time. This suggests that the dividend might not be the most reliable. The dividend has gone from an annual total of ₹6.00 in 2018 to the most recent total annual payment of ₹9.75. This means that it has been growing its distributions at 7.2% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Cochin Shipyard might have put its house in order since then, but we remain cautious.

The Dividend Has Growth Potential

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. We are encouraged to see that Cochin Shipyard has grown earnings per share at 6.2% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Our Thoughts On Cochin Shipyard's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Cochin Shipyard is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Cochin Shipyard that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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