Salzer Electronics (NSE:SALZERELEC) Has Announced That It Will Be Increasing Its Dividend To ₹2.50

The board of Salzer Electronics Limited (NSE:SALZERELEC) has announced that it will be paying its dividend of ₹2.50 on the 14th of October, 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.

Check out our latest analysis for Salzer Electronics

Salzer Electronics' Earnings Easily Cover The Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Before making this announcement, Salzer Electronics was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share could rise by 12.6% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 9.2% by next year, which is in a pretty sustainable range.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of ₹1.50 in 2014 to the most recent total annual payment of ₹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.

The Dividend Looks Likely To Grow

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. We are encouraged to see that Salzer Electronics has grown earnings per share at 13% per year over the past five years. Salzer Electronics definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like Salzer Electronics' Dividend

Overall, a dividend increase is always good, and we think that Salzer Electronics is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

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, Salzer Electronics has 3 warning signs (and 1 which is concerning) we think you should know about. 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.