Universal Cables (NSE:UNIVCABLES) Is Paying Out A Larger Dividend Than Last Year

Universal Cables Limited (NSE:UNIVCABLES) has announced that it will be increasing its dividend from last year's comparable payment on the 11th of October to ₹3.00. This takes the dividend yield to 0.8%, which shareholders will be pleased with.

View our latest analysis for Universal Cables

Universal Cables' Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. However, Universal Cables' earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

If the trend of the last few years continues, EPS will grow by 6.9% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 9.0% by next year, which is in a pretty sustainable range.

Universal Cables' Dividend Has Lacked Consistency

Universal Cables has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2018, the annual payment back then was ₹1.50, compared to the most recent full-year payment of ₹3.00. This works out to be a compound annual growth rate (CAGR) of approximately 15% a year over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

Universal Cables Could Grow Its Dividend

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. We are encouraged to see that Universal Cables has grown earnings per share at 6.9% per year over the past five years. Universal Cables definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On Universal Cables' Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 4 warning signs for Universal Cables (of which 3 shouldn't be ignored!) you should know about. 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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