Salasar Techno Engineering (NSE:SALASAR) Has Affirmed Its Dividend Of ₹0.10

The board of Salasar Techno Engineering Limited (NSE:SALASAR) has announced that it will pay a dividend of ₹0.10 per share on the 23rd of October. This payment means the dividend yield will be 0.2%, which is below the average for the industry.

Check out our latest analysis for Salasar Techno Engineering

Salasar Techno Engineering's Payment Has Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Salasar Techno Engineering is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Looking forward, earnings per share could rise by 3.5% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 6.9% by next year, which we think can be pretty sustainable going forward.

Salasar Techno Engineering's Dividend Has Lacked Consistency

Salasar Techno Engineering has been paying dividends for a while, but the track record isn't stellar. This suggests that the dividend might not be the most reliable. The payments haven't really changed that much since 6 years ago. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

Salasar Techno Engineering May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. However, Salasar Techno Engineering has only grown its earnings per share at 3.5% per annum over the past five years. If Salasar Techno Engineering is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

We should note that Salasar Techno Engineering has issued stock equal to 11% of shares outstanding. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Salasar Techno Engineering's payments, as there could be some issues with sustaining them into the future. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 2 warning signs for Salasar Techno Engineering (of which 1 is a bit concerning!) you should know about. Is Salasar Techno Engineering 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.