Crompton Greaves Consumer Electricals (NSE:CROMPTON) Will Pay A Dividend Of ₹2.50

The board of Crompton Greaves Consumer Electricals Limited (NSE:CROMPTON) has announced that it will pay a dividend of ₹2.50 per share on the 21st of August. This makes the dividend yield 0.7%, which will augment investor returns quite nicely.

View our latest analysis for Crompton Greaves Consumer Electricals

Crompton Greaves Consumer Electricals' Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. However, prior to this announcement, Crompton Greaves Consumer Electricals' dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 10.6%. If the dividend continues along recent trends, we estimate the payout ratio will be 28%, which is in the range that makes us comfortable with the sustainability of the dividend.

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. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The dividend has gone from ₹1.50 in 2017 to the most recent annual payment of ₹2.50. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. 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 Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see Crompton Greaves Consumer Electricals has been growing its earnings per share at 15% a 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.

Crompton Greaves Consumer Electricals Looks Like A Great Dividend Stock

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 2 warning signs for Crompton Greaves Consumer Electricals that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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