Salasar Techno Engineering (NSE:SALASAR) Has Announced A Dividend Of ₹0.10

Salasar Techno Engineering Limited's (NSE:SALASAR) investors are due to receive a payment of ₹0.10 per share on 23rd of October. Including this payment, the dividend yield on the stock will be 0.2%, which is a modest boost for shareholders' returns.

See our latest analysis for Salasar Techno Engineering

Salasar Techno Engineering's Payment Has Solid Earnings Coverage

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Prior to this announcement, Salasar Techno Engineering's earnings easily covered the dividend, but free cash flows were negative. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

If the trend of the last few years continues, EPS will grow by 3.5% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 6.9% by next year, which is in a pretty sustainable range.

Salasar Techno Engineering's Dividend Has Lacked Consistency

Looking back, Salasar Techno Engineering's dividend hasn't been particularly consistent. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. 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.

Dividend Growth May Be Hard To Achieve

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. Earnings have grown at around 3.5% a year for the past five years, which isn't massive but still better than seeing them shrink. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.

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.

Our Thoughts On Salasar Techno Engineering's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. To that end, Salasar Techno Engineering has 2 warning signs (and 1 which doesn't sit too well with us) we think 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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