Lambodhara Textiles (NSE:LAMBODHARA) Has Announced That It Will Be Increasing Its Dividend To ₹1.50

Lambodhara Textiles Limited (NSE:LAMBODHARA) has announced that it will be increasing its dividend from last year's comparable payment on the 8th of October to ₹1.50. This takes the dividend yield to 1.7%, which shareholders will be pleased with.

View our latest analysis for Lambodhara Textiles

Lambodhara Textiles' Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, Lambodhara Textiles was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

If the trend of the last few years continues, EPS will grow by 14.6% over the next 12 months. If the dividend continues on this path, the payout ratio could be 9.1% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2012, the dividend has gone from ₹0.50 total annually to ₹1.50. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. Lambodhara Textiles 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

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Lambodhara Textiles has seen EPS rising for the last five years, at 15% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

We Really Like Lambodhara Textiles' Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 2 warning signs for Lambodhara Textiles that you should be aware of before investing. Is Lambodhara Textiles not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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