Crompton Greaves Consumer Electricals' (NSE:CROMPTON) Upcoming Dividend Will Be Larger Than Last Year's

The board of Crompton Greaves Consumer Electricals Limited (NSE:CROMPTON) has announced that it will be increasing its dividend by 20% on the 21st of August to ₹3.00, up from last year's comparable payment of ₹2.50. This will take the annual payment to 1.0% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Crompton Greaves Consumer Electricals

Crompton Greaves Consumer Electricals' Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, Crompton Greaves Consumer Electricals' earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 87.8% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 26%, which is in the range that makes us comfortable with the sustainability of the dividend.

Crompton Greaves Consumer Electricals' Dividend Has Lacked Consistency

Crompton Greaves Consumer Electricals has been paying dividends for a while, but the track record isn't stellar. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2017, the dividend has gone from ₹1.50 total annually to ₹2.50. This means that it has been growing its distributions at 8.9% per annum over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

Crompton Greaves Consumer Electricals Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Crompton Greaves Consumer Electricals has impressed us by growing EPS at 7.0% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Our Thoughts On Crompton Greaves Consumer Electricals' Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. 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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 2 warning signs for Crompton Greaves Consumer Electricals that investors need to be conscious of moving forward. 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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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.