The board of Signet Industries Limited (NSE:SIGIND) has announced that it will pay a dividend of ₹0.50 per share on the 29th of October. This means the annual payment is 1.1% of the current stock price, which is above the average for the industry.
View 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. However, prior to this announcement, Signet Industries' dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.
Looking forward, EPS could fall by 4.7% 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 9.4%, 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
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The payments haven't really changed that much since 10 years ago. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.
The Dividend's Growth Prospects Are Limited
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Signet Industries has seen earnings per share falling at 4.7% per year over the last five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.
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. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. 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. However, there are other things to consider for investors when analysing stock performance. To that end, Signet Industries has 5 warning signs (and 2 which are potentially serious) we think you should know about. 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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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.
About NSEI:SIGIND
Signet Industries
Primarily engages in merchant trading of various polymer and plastic granules in India.
Fair value second-rate dividend payer.
