Crompton Greaves Consumer Electricals' (NSE:CROMPTON) Dividend Will Be ₹3.00

The board of Crompton Greaves Consumer Electricals Limited (NSE:CROMPTON) has announced that it will pay a dividend on the 25th of August, with investors receiving ₹3.00 per share. Based on this payment, the dividend yield on the company's stock will be 0.8%, which is an attractive boost to shareholder returns.

View our latest analysis for Crompton Greaves Consumer Electricals

Crompton Greaves Consumer Electricals' Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Crompton Greaves Consumer Electricals' dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

The next year is set to see EPS grow by 93.1%. If the dividend continues on this path, the payout ratio could be 25% by next year, which we think can be pretty sustainable going forward.

Crompton Greaves Consumer Electricals' Dividend Has Lacked Consistency

It's comforting to see that Crompton Greaves Consumer Electricals has been paying a dividend for a number of years now, however it has been cut at least once in that time. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2017, the annual payment back then was ₹1.50, compared to the most recent full-year payment of ₹3.00. This implies that the company grew its distributions at a yearly rate of about 10% over that duration. 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's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Crompton Greaves Consumer Electricals hasn't seen much change in its earnings per share over the last five years. The company has been growing at a pretty soft 1.3% per annum, and is paying out quite a lot of its earnings to shareholders. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.

In Summary

In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Crompton Greaves Consumer Electricals that investors should take into consideration. Is Crompton Greaves Consumer Electricals not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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