Techno Electric & Engineering's (NSE:TECHNOE) Dividend Is Being Reduced To ₹2.00

Techno Electric & Engineering Company Limited's (NSE:TECHNOE) dividend is being reduced from last year's payment covering the same period to ₹2.00 on the 26th of October. This means that the dividend yield is 0.7%, which is a bit low when comparing to other companies in the industry.

Check out our latest analysis for Techno Electric & Engineering

Techno Electric & Engineering's Payment Has Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Before making this announcement, Techno Electric & Engineering was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

EPS is set to fall by 2.1% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 11%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Techno Electric & Engineering's Dividend Has Lacked Consistency

Even in its short history, we have seen the dividend cut. The annual payment during the last 2 years was ₹6.00 in 2020, and the most recent fiscal year payment was ₹2.00. Dividend payments have fallen sharply, down 67% 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.

Dividend Growth May Be Hard To Achieve

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Earnings per share has been crawling upwards at 4.1% per year. While growth may be thin on the ground, Techno Electric & Engineering could always pay out a higher proportion of earnings to increase shareholder returns.

In Summary

Even though the dividend was cut this year, we think Techno Electric & Engineering has the ability to make consistent payments in the future. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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 Techno Electric & Engineering 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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