Ice Make Refrigeration (NSE:ICEMAKE) Has Announced A Dividend Of ₹1.20

Ice Make Refrigeration Limited's (NSE:ICEMAKE) investors are due to receive a payment of ₹1.20 per share on 25th of October. This means the annual payment is 1.6% of the current stock price, which is above the average for the industry.

See our latest analysis for Ice Make Refrigeration

Ice Make Refrigeration's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. The last dividend was quite easily covered by Ice Make Refrigeration's earnings. This means that a large portion of its earnings are being retained to grow the business.

EPS is set to fall by 11.9% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could be 59%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Ice Make Refrigeration Is Still Building Its Track Record

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. Since 2018, the dividend has gone from ₹1.00 to ₹1.20. This means that it has been growing its distributions at 6.3% per annum over that time. Investors will likely want to see a longer track record of growth before making decision to add this to their income portfolio.

Dividend Growth Potential Is Shaky

Investors could be attracted to the stock based on the quality of its payment history. However, initial appearances might be deceiving. Earnings per share has been sinking by 12% over the last five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 4 warning signs for Ice Make Refrigeration (of which 1 is potentially serious!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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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.
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