Eimco Elecon (India) (NSE:EIMCOELECO) Is Paying Out A Dividend Of ₹5.00

The board of Eimco Elecon (India) Limited (NSE:EIMCOELECO) has announced that it will pay a dividend of ₹5.00 per share on the 25th of July. This payment means the dividend yield will be 0.2%, which is below the average for the industry.

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 Eimco Elecon (India)'s stock price has increased by 44% 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 Eimco Elecon (India)

Eimco Elecon (India)'s Earnings Easily Cover The Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. However, prior to this announcement, Eimco Elecon (India)'s dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share could rise by 10.7% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 6.7%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of ₹4.00 in 2014 to the most recent total annual payment of ₹5.00. This works out to be a compound annual growth rate (CAGR) of approximately 2.3% a year over that time. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Eimco Elecon (India) has impressed us by growing EPS at 11% 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.

We Really Like Eimco Elecon (India)'s Dividend

Overall, we like to see the dividend staying consistent, and we think Eimco Elecon (India) might even raise payments in the future. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Now, if you want to look closer, it would be worth checking out our free research on Eimco Elecon (India) management tenure, salary, and performance. Is Eimco Elecon (India) not quite the opportunity you were looking for? Why not check out our selection of top 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.