Cochin Shipyard (NSE:COCHINSHIP) Is Increasing Its Dividend To ₹8.00

Cochin Shipyard Limited (NSE:COCHINSHIP) will increase its dividend on the 6th of December to ₹8.00, which is 14% higher than last year's payment from the same period of ₹7.00. This takes the dividend yield to 1.6%, which shareholders will be pleased with.

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 61% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

See our latest analysis for Cochin Shipyard

Cochin Shipyard's Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, Cochin Shipyard was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

Over the next year, EPS is forecast to expand by 91.4%. If the dividend continues along recent trends, we estimate the payout ratio will be 34%, which is in the range that makes us comfortable with the sustainability of the dividend.

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. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The annual payment during the last 5 years was ₹12.00 in 2018, and the most recent fiscal year payment was ₹17.00. This implies that the company grew its distributions at a yearly rate of about 7.2% over that duration. 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.

Dividend Growth May Be Hard To Achieve

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 hasn't seen much change in its earnings per share over the last five years.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Cochin Shipyard will make a great income stock. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think Cochin Shipyard is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 2 warning signs for Cochin Shipyard you should be aware of, and 1 of them is potentially serious. 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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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.