Elecon Engineering (NSE:ELECON) Has Affirmed Its Dividend Of ₹2.00

The board of Elecon Engineering Company Limited (NSE:ELECON) has announced that it will pay a dividend on the 25th of July, with investors receiving ₹2.00 per share. This means that the annual payment will be 0.4% of the current stock price, which is in line with the average for the industry.

See our latest analysis for Elecon Engineering

Elecon Engineering's Payment Has Solid Earnings Coverage

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. However, Elecon Engineering's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS could expand by 38.4% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 7.7% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of ₹1.00 in 2014 to the most recent total annual payment of ₹4.00. This means that it has been growing its distributions at 15% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

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 Elecon Engineering has grown earnings per share at 38% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

We Really Like Elecon Engineering's Dividend

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Elecon Engineering that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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