Swelect Energy Systems (NSE:SWELECTES) Is Due To Pay A Dividend Of ₹3.00

Swelect Energy Systems Limited's (NSE:SWELECTES) investors are due to receive a payment of ₹3.00 per share on 8th of August. The dividend yield will be 1.0% based on this payment which is still above the industry average.

Check out our latest analysis for Swelect Energy Systems

Swelect Energy Systems' Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Swelect Energy Systems was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS could expand by 8.4% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 13%, which is in the range that makes us comfortable with the sustainability of the dividend.

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 first annual payment during the last 10 years was ₹80.00 in 2012, and the most recent fiscal year payment was ₹3.00. Dividend payments have fallen sharply, down 96% 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 Has Growth Potential

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Swelect Energy Systems has impressed us by growing EPS at 8.4% per year over the past five years. Swelect Energy Systems definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like Swelect Energy Systems' Dividend

Overall, we like to see the dividend staying consistent, and we think Swelect Energy Systems might even raise payments in the future. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 3 warning signs for Swelect Energy Systems that investors need to be conscious of moving forward. Is Swelect Energy Systems 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.