Shanthi Gears (NSE:SHANTIGEAR) Is Paying Out A Dividend Of ₹2.00

Shanthi Gears Limited (NSE:SHANTIGEAR) will pay a dividend of ₹2.00 on the 27th of August. This means the annual payment is 1.0% of the current stock price, which is above the average for the industry.

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Shanthi Gears' Future Dividend Projections Appear Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, Shanthi Gears was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share could rise by 30.7% 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 38% by next year, which is in a pretty sustainable range.

See our latest analysis for Shanthi Gears

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the annual payment back then was ₹0.50, compared to the most recent full-year payment of ₹5.00. This implies that the company grew its distributions at a yearly rate of about 26% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. We are encouraged to see that Shanthi Gears has grown earnings per share at 31% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

We Really Like Shanthi Gears' Dividend

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Shanthi Gears that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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