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 of ₹0.50 per share on the 25th of October. This makes the dividend yield 0.7%, which will augment investor returns quite nicely.

Check out our latest analysis for Signet Industries

Signet Industries' Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, Signet Industries' earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

EPS is set to fall by 2.7% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we believe the payout ratio could be 11%, which we are pretty comfortable with and we think is feasible on an earnings basis.

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 ₹1.20 in 2014 to the most recent total annual payment of ₹0.50. The dividend has shrunk at around 8.4% a year during that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Signet Industries May Find It Hard To Grow The Dividend

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. It's not great to see that Signet Industries' earnings per share has fallen at approximately 2.7% per year over the past five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.

Our Thoughts On Signet Industries' Dividend

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. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 3 warning signs for Signet Industries you should be aware of, and 1 of them doesn't sit too well with us. Is Signet Industries not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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