Relaxo Footwears' (NSE:RELAXO) Dividend Will Be ₹2.50

The board of Relaxo Footwears Limited (NSE:RELAXO) has announced that it will pay a dividend of ₹2.50 per share on the 24th of September. This payment means the dividend yield will be 0.2%, which is below the average for the industry.

View our latest analysis for Relaxo Footwears

Relaxo Footwears' Dividend Is Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. Relaxo Footwears is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

If the trend of the last few years continues, EPS will grow by 13.4% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 30% by next year, which is in a pretty sustainable range.

Relaxo Footwears Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was ₹0.075 in 2012, and the most recent fiscal year payment was ₹2.50. This implies that the company grew its distributions at a yearly rate of about 42% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Relaxo Footwears has grown earnings per share at 13% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Our Thoughts On Relaxo Footwears' Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Relaxo Footwears 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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