Cochin Shipyard (NSE:COCHINSHIP) Has Announced That It Will Be Increasing Its Dividend To ₹7.00

Cochin Shipyard Limited (NSE:COCHINSHIP) has announced that it will be increasing its periodic dividend on the 9th of December to ₹7.00, which will be 17% higher than last year's comparable payment amount of ₹6.00. This will take the annual payment to 2.6% of the stock price, which is above what most companies in the industry pay.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Cochin Shipyard's stock price has increased by 90% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

Check out the opportunities and risks within the IN Machinery industry.

Cochin Shipyard's Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, Cochin Shipyard's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

If the trend of the last few years continues, EPS will grow by 9.6% over the next 12 months. If the dividend continues on this path, the payout ratio could be 44% by next year, which we think can be pretty sustainable going forward.

Cochin Shipyard's Dividend Has Lacked Consistency

Looking back, the company hasn't been paying the most consistent dividend, but with such a short dividend history it could be too early to draw solid conclusions. The annual payment during the last 4 years was ₹12.00 in 2018, and the most recent fiscal year payment was ₹16.75. This works out to be a compound annual growth rate (CAGR) of approximately 8.7% a year over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

Cochin Shipyard Could Grow Its Dividend

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. Cochin Shipyard has seen EPS rising for the last five years, at 9.6% per annum. Cochin Shipyard definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Cochin Shipyard Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for Cochin Shipyard that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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