ESAB India (NSE:ESABINDIA) Has Announced That It Will Be Increasing Its Dividend To ₹30.00

The board of ESAB India Limited (NSE:ESABINDIA) has announced that it will be increasing its dividend by 36% on the 10th of December to ₹30.00, up from last year's comparable payment of ₹22.00. This will take the dividend yield to an attractive 1.7%, providing a nice boost to shareholder returns.

Check out our latest analysis for ESAB India

ESAB India Is Paying Out More Than It Is Earning

A big dividend yield for a few years doesn't mean much if it can't be sustained. The last dividend was quite comfortably covered by ESAB India's earnings, but it was a bit tighter on the cash flow front. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.

Earnings per share could rise by 32.2% over the next year if things go the same way as they have for the last few years. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 99% over the next year.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2012, the annual payment back then was ₹15.00, compared to the most recent full-year payment of ₹60.00. This implies that the company grew its distributions at a yearly rate of about 15% over that duration. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that ESAB India has been growing its earnings per share at 32% a year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that ESAB India could prove to be a strong dividend payer.

Our Thoughts On ESAB India's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While ESAB India is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for ESAB India that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.