Century Enka's (NSE:CENTENKA) Dividend Will Be Increased To ₹10.00

Century Enka Limited's (NSE:CENTENKA) dividend will be increasing from last year's payment of the same period to ₹10.00 on 17th of September. This will take the dividend yield to an attractive 2.3%, providing a nice boost to shareholder returns.

Check out our latest analysis for Century Enka

Century Enka's Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Century Enka is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Over the next year, EPS could expand by 15.1% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 11% by next year, which is in a pretty sustainable range.

Century Enka Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of ₹5.00 in 2012 to the most recent total annual payment of ₹10.00. This means that it has been growing its distributions at 7.2% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Century Enka has seen EPS rising for the last five years, at 15% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Century Enka's prospects of growing its dividend payments in the future.

Our Thoughts On Century Enka's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Century Enka has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.