Relaxo Footwears (NSE:RELAXO) Will Pay A Larger Dividend Than Last Year At ₹3.00

Relaxo Footwears Limited's (NSE:RELAXO) dividend will be increasing from last year's payment of the same period to ₹3.00 on 28th of September. This takes the annual payment to 0.4% of the current stock price, which is about average for the industry.

Check out our latest analysis for Relaxo Footwears

Relaxo Footwears' Dividend Is Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Prior to this announcement, Relaxo Footwears' earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Looking forward, earnings per share is forecast to rise by 115.1% over the next year. If the dividend continues on this path, the payout ratio could be 23% by next year, which we think can be pretty sustainable going forward.

Relaxo Footwears Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the annual payment back then was ₹0.10, compared to the most recent full-year payment of ₹3.00. This implies that the company grew its distributions at a yearly rate of about 41% 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's Growth Prospects Are Limited

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Relaxo Footwears hasn't seen much change in its earnings per share over the last five years. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.

Our Thoughts On Relaxo Footwears' Dividend

Overall, we always like to see the dividend being raised, but we don't think Relaxo Footwears will make a great income stock. While Relaxo Footwears is earning enough to cover the payments, the cash flows are lacking. We don't think Relaxo Footwears is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Relaxo Footwears that investors should know about before committing capital to this stock. 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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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.

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