Thermax's (NSE:THERMAX) Upcoming Dividend Will Be Larger Than Last Year's

Thermax Limited's (NSE:THERMAX) dividend will be increasing from last year's payment of the same period to ₹9.00 on 8th of August. This takes the annual payment to 0.4% of the current stock price, which unfortunately is below what the industry is paying.

View our latest analysis for Thermax

Thermax's Payment Has Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. Before making this announcement, Thermax was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 136.2%. If the dividend continues on this path, the payout ratio could be 13% by next year, which we think can be pretty sustainable going forward.

Thermax Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2012, the annual payment back then was ₹7.00, compared to the most recent full-year payment of ₹9.00. This means that it has been growing its distributions at 2.5% per annum over that time. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

The Dividend Has Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Thermax has seen EPS rising for the last five years, at 7.0% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Thermax Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Earnings growth generally bodes well for the future value of company dividend payments. See if the 21 Thermax analysts we track are forecasting continued growth with our free report on analyst estimates for the company. If you are a dividend investor, you might also want to look at our curated list of high yield 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.