Escorts Kubota (NSE:ESCORTS) Is Paying Out A Dividend Of ₹7.00

The board of Escorts Kubota Limited (NSE:ESCORTS) has announced that it will pay a dividend of ₹7.00 per share on the 13th of August. Including this payment, the dividend yield on the stock will be 0.3%, which is a modest boost for shareholders' returns.

See our latest analysis for Escorts Kubota

Escorts Kubota's Dividend Is Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Based on the last payment, Escorts Kubota was paying only paying out a fraction of earnings, but the payment was a massive 1,478% of cash flows. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

The next year is set to see EPS grow by 68.6%. If the dividend continues on this path, the payout ratio could be 8.5% by next year, which we think can be pretty sustainable going forward.

Escorts Kubota Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2013, the dividend has gone from ₹1.20 total annually to ₹7.00. This means that it has been growing its distributions at 19% per annum over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend Has Growth Potential

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that Escorts Kubota has been growing its earnings per share at 7.2% a year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Our Thoughts On Escorts Kubota's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While Escorts Kubota is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 16 analysts we track are forecasting for Escorts Kubota for free with public analyst estimates for the company. Is Escorts Kubota 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.