Ion Exchange (India) (NSE:IONEXCHANG) Is Increasing Its Dividend To ₹1.50

Ion Exchange (India) Limited (NSE:IONEXCHANG) has announced that it will be increasing its dividend from last year's comparable payment on the 11th of October to ₹1.50. Despite this raise, the dividend yield of 0.2% is only a modest boost to shareholder returns.

See our latest analysis for Ion Exchange (India)

Ion Exchange (India)'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, Ion Exchange (India) was paying a whopping 192% as a dividend, but this only made up 9.1% of its overall earnings. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

Looking forward, earnings per share could rise by 23.6% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 8.6%, which is in the range that makes us comfortable with the sustainability of the dividend.

Ion Exchange (India) Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2014, the dividend has gone from ₹0.20 total annually to ₹1.50. This means that it has been growing its distributions at 22% per annum over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Ion Exchange (India) has grown earnings per share at 24% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

Our Thoughts On Ion Exchange (India)'s Dividend

Overall, we always like to see the dividend being raised, but we don't think Ion Exchange (India) will make a great income stock. While Ion Exchange (India) is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

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 2 warning signs for Ion Exchange (India) that investors should take into consideration. Is Ion Exchange (India) not quite the opportunity you were looking for? Why not check out our selection of top 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.