Salzer Electronics (NSE:SALZERELEC) Has Affirmed Its Dividend Of ₹2.50

Salzer Electronics Limited's (NSE:SALZERELEC) investors are due to receive a payment of ₹2.50 per share on 12th of October. This means the dividend yield will be fairly typical at 0.3%.

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Salzer Electronics' Payment Could Potentially Have Solid Earnings Coverage

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Prior to this announcement, Salzer Electronics' 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.

Looking forward, earnings per share could rise by 8.9% 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 9.3%, which is in the range that makes us comfortable with the sustainability of the dividend.

Check out our latest analysis for Salzer Electronics

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was ₹1.50 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 5.2% over that duration. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

Salzer Electronics Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Salzer Electronics has seen EPS rising for the last five years, at 8.9% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Salzer Electronics' prospects of growing its dividend payments in the future.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Salzer Electronics' payments, as there could be some issues with sustaining them into the future. While Salzer Electronics is earning enough to cover the payments, the cash flows are lacking. We don't think Salzer Electronics is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 2 warning signs for Salzer Electronics you should be aware of, and 1 of them can't be ignored. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.