Relaxo Footwears (NSE:RELAXO) Will Pay A Dividend Of ₹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 23rd of September. This means the annual payment will be 0.3% of the current stock price, which is lower than the industry average.

View our latest analysis for Relaxo Footwears

Relaxo Footwears' Dividend Is Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Based on the last payment, Relaxo Footwears was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Over the next year, EPS is forecast to expand by 149.4%. Assuming the dividend continues along recent trends, we think the payout ratio could be 18% 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 2013, and the most recent fiscal year payment was ₹2.50. This means that it has been growing its distributions at 42% per annum over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Dividend Growth May Be Hard To Achieve

Investors could be attracted to the stock based on the quality of its payment history. Let's not jump to conclusions as things might not be as good as they appear on the surface. Although it's important to note that Relaxo Footwears' earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.

In Summary

Overall, a consistent dividend is a good thing, and we think that Relaxo Footwears has the ability to continue this into the future. With shrinking earnings, the company may see some issues maintaining the dividend even though they look pretty sustainable for now. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Given that earnings are not growing, the dividend does not look nearly so attractive. Very few businesses see earnings consistently shrink year after year in perpetuity though, and so it might be worth seeing what the 12 analysts we track are forecasting for the future. Is Relaxo Footwears not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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