Wendt (India)'s (NSE:WENDT) Shareholders Will Receive A Smaller Dividend Than Last Year

Wendt (India) Limited (NSE:WENDT) has announced it will be reducing its dividend payable on the 13th of August to ₹20.00, which is 60% lower than what investors received last year for the same period. However, the dividend yield of 0.6% still remains in a typical range for the industry.

See our latest analysis for Wendt (India)

Wendt (India)'s Earnings Easily Cover The Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. However, based ont he last payment, Wendt (India) was earning enough to cover the dividend pretty comfortably. The business is earning enough to make the dividend feasible, but the cash payout ratio of 87% shows that most of the cash is going back to the shareholders, which could constrain growth prospects going forward.

If the trend of the last few years continues, EPS will grow by 14.7% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 25% by next year, which is in a pretty sustainable range.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was ₹20.00 in 2014, and the most recent fiscal year payment was ₹80.00. 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.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Wendt (India) has impressed us by growing EPS at 15% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Wendt (India)'s prospects of growing its dividend payments in the future.

Our Thoughts On Wendt (India)'s Dividend

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. Overall, we don't think this company has the makings of a good income 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. For instance, we've picked out 1 warning sign for Wendt (India) that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.