Swelect Energy Systems' (NSE:SWELECTES) Dividend Will Be Reduced To ₹1.20

Swelect Energy Systems Limited (NSE:SWELECTES) is reducing its dividend from last year's comparable payment to ₹1.20 on the 10th of August. Based on this payment, the dividend yield will be 0.4%, which is lower than the average for the industry.

Check out our latest analysis for Swelect Energy Systems

Swelect Energy Systems' Payment Has Solid Earnings Coverage

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. However, prior to this announcement, Swelect Energy Systems' dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS could expand by 12.7% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 3.1%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was ₹80.00 in 2013, and the most recent fiscal year payment was ₹1.20. Dividend payments have fallen sharply, down 99% over that time. 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.

The Dividend Looks Likely To Grow

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. Swelect Energy Systems has impressed us by growing EPS at 13% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

We Really Like Swelect Energy Systems' Dividend

In general, we don't like to see the dividend being cut, especially when the company has such high potential like Swelect Energy Systems does. The cut will allow the company to continue paying out the dividend without putting the balance sheet under pressure, which means that it could remain sustainable for longer. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 2 warning signs for Swelect Energy Systems that investors need to be conscious of moving forward. 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.