ITD Cementation India (NSE:ITDCEM) Has Announced That It Will Be Increasing Its Dividend To ₹1.70

The board of ITD Cementation India Limited (NSE:ITDCEM) has announced that it will be paying its dividend of ₹1.70 on the 10th of September, an increased payment from last year's comparable dividend. Although the dividend is now higher, the yield is only 0.3%, which is below the industry average.

See our latest analysis for ITD Cementation India

ITD Cementation India's Earnings Easily Cover The Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. Before making this announcement, ITD Cementation India was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

The next year is set to see EPS grow by 92.7%. Assuming the dividend continues along recent trends, we think the payout ratio could be 6.7% by next year, which is in a pretty sustainable range.

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. The annual payment during the last 10 years was ₹0.10 in 2014, and the most recent fiscal year payment was ₹1.70. This means that it has been growing its distributions at 33% per annum over that time. 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

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. We are encouraged to see that ITD Cementation India has grown earnings per share at 38% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

We Really Like ITD Cementation India's Dividend

Overall, a dividend increase is always good, and we think that ITD Cementation India is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income 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. As an example, we've identified 2 warning signs for ITD Cementation India that you should be aware of before investing. Is ITD Cementation 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.

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