Safari Industries (India) (NSE:SAFARI) Has Announced A Dividend Of ₹1.50

The board of Safari Industries (India) Limited (NSE:SAFARI) has announced that it will pay a dividend of ₹1.50 per share on the 6th of December. This means the annual payment will be 0.1% of the current stock price, which is lower than the industry average.

Check out our latest analysis for Safari Industries (India)

Safari Industries (India)'s Future Dividend Projections Appear 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. Safari Industries (India) is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Looking forward, earnings per share is forecast to rise by 87.8% over the next year. If the dividend continues on this path, the payout ratio could be 6.0% by next year, which we think can be pretty sustainable going forward.

Safari Industries (India)'s Dividend Has Lacked Consistency

Safari Industries (India) has been paying dividends for a while, but the track record isn't stellar. This suggests that the dividend might not be the most reliable. The annual payment during the last 9 years was ₹0.10 in 2015, and the most recent fiscal year payment was ₹3.00. This means that it has been growing its distributions at 46% per annum over that time. Safari Industries (India) 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

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Safari Industries (India) has impressed us by growing EPS at 37% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

Our Thoughts On Safari Industries (India)'s Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While Safari Industries (India) is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Safari Industries (India) has 3 warning signs (and 1 which is a bit concerning) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.