Ram Ratna Wires (NSE:RAMRAT) Will Pay A Dividend Of ₹2.50

Ram Ratna Wires Limited's (NSE:RAMRAT) investors are due to receive a payment of ₹2.50 per share on 28th of September. Based on this payment, the dividend yield will be 0.4%, which is fairly typical for the industry.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

Ram Ratna Wires' Future Dividend Projections Appear Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. Prior to this announcement, Ram Ratna Wires' earnings easily covered the dividend, but free cash flows were negative. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Looking forward, earnings per share could rise by 34.2% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 15%, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for Ram Ratna Wires

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was ₹0.50 in 2015, and the most recent fiscal year payment was ₹2.50. This implies that the company grew its distributions at a yearly rate of about 17% over that duration. Ram Ratna Wires has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

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 Ram Ratna Wires has been growing its earnings per share at 34% a 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.

Our Thoughts On Ram Ratna Wires' Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While Ram Ratna Wires is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for Ram Ratna Wires (1 can't be ignored!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.