Signet Industries (NSE:SIGIND) Has Announced A Dividend Of ₹0.50

The board of Signet Industries Limited (NSE:SIGIND) has announced that it will pay a dividend on the 28th of October, with investors receiving ₹0.50 per share. This means the annual payment is 1.1% of the current stock price, which is above the average for the industry.

See our latest analysis for Signet Industries

Signet Industries' Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Signet Industries' earnings easily covered the dividend, but free cash flows were negative. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Looking forward, EPS could fall by 4.5% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could be 11%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from ₹1.25 in 2011 to the most recent annual payment of ₹0.50. The dividend has shrunk at around 8.8% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth May Be Hard To Achieve

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. Signet Industries has seen earnings per share falling at 4.5% per year over the last five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Signet Industries' payments, as there could be some issues with sustaining them into the future. While Signet Industries is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

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. Just as an example, we've come across 5 warning signs for Signet Industries you should be aware of, and 2 of them are a bit concerning. We have also put together a list of global stocks with a solid dividend.

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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.
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