Swelect Energy Systems (NSE:SWELECTES) Has Affirmed Its Dividend Of ₹3.00

The board of Swelect Energy Systems Limited (NSE:SWELECTES) has announced that it will pay a dividend of ₹3.00 per share on the 8th of August. The dividend yield will be 0.9% based on this payment which is still above the industry average.

View our latest analysis for Swelect Energy Systems

Swelect Energy Systems' Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. However, prior to this announcement, Swelect Energy Systems' 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.

EPS is set to fall by 6.1% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we believe the payout ratio could be 31%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from ₹2.00 in 2012 to the most recent annual payment of ₹3.00. This works out to be a compound annual growth rate (CAGR) of approximately 4.1% a year over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

Dividend Growth May Be Hard To Come By

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. In the last five years, Swelect Energy Systems' earnings per share has shrunk at approximately 6.1% per annum. 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 Swelect Energy Systems' Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Swelect Energy Systems' 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. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. Just as an example, we've come across 5 warning signs for Swelect Energy Systems you should be aware of, and 1 of them is significant. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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