Techno Electric & Engineering (NSE:TECHNOE) Is Paying Out A Larger Dividend Than Last Year

Techno Electric & Engineering Company Limited (NSE:TECHNOE) will increase its dividend from last year's comparable payment on the 26th of October to ₹7.00. This takes the annual payment to 0.4% of the current stock price, which unfortunately is below what the industry is paying.

See our latest analysis for Techno Electric & Engineering

Techno Electric & Engineering's 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. Techno Electric & Engineering is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Over the next year, EPS is forecast to expand by 96.6%. If the dividend continues along recent trends, we estimate the payout ratio will be 15%, which is in the range that makes us comfortable with the sustainability of the dividend.

Techno Electric & Engineering's Dividend Has Lacked Consistency

The track record isn't the longest, but we are already seeing a bit of instability in the payments. Since 2020, the dividend has gone from ₹6.00 total annually to ₹7.00. This implies that the company grew its distributions at a yearly rate of about 3.9% over that duration. 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 Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's encouraging to see that Techno Electric & Engineering has been growing its earnings per share at 12% a year over the past five years. Techno Electric & Engineering definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On Techno Electric & Engineering's Dividend

Overall, we always like to see the dividend being raised, but we don't think Techno Electric & Engineering will make a great income stock. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

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. For instance, we've picked out 1 warning sign for Techno Electric & Engineering that investors should take into consideration. 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.