Crompton Greaves Consumer Electricals (NSE:CROMPTON) Is Paying Out A Larger Dividend Than Last Year

Crompton Greaves Consumer Electricals Limited (NSE:CROMPTON) has announced that it will be increasing its dividend from last year's comparable payment on the 21st of August to ₹3.00. This makes the dividend yield 1.0%, which is above the industry average.

Check out our latest analysis for Crompton Greaves Consumer Electricals

Crompton Greaves Consumer Electricals' Earnings Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Crompton Greaves Consumer Electricals' dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Looking forward, earnings per share is forecast to rise by 80.7% over the next year. 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.

Crompton Greaves Consumer Electricals' Dividend Has Lacked Consistency

Looking back, Crompton Greaves Consumer Electricals' dividend hasn't been particularly consistent. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2017, the annual payment back then was ₹1.50, compared to the most recent full-year payment of ₹3.00. This means that it has been growing its distributions at 12% per annum over that time. Crompton Greaves Consumer Electricals has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Has Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Crompton Greaves Consumer Electricals has grown earnings per share at 7.0% per year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

Our Thoughts On Crompton Greaves Consumer Electricals' Dividend

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

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. As an example, we've identified 2 warning signs for Crompton Greaves Consumer Electricals that you should be aware of before investing. 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.