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

Safari Industries (India) Limited (NSE:SAFARI) has announced that it will pay a dividend of ₹1.50 per share on the 30th of August. Including this payment, the dividend yield on the stock will be 0.1%, which is a modest boost for shareholders' returns.

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Safari Industries (India)'s Future Dividend Projections Appear Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Prior to this announcement, Safari Industries (India)'s 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 116.8% over the next year. If the dividend continues on this path, the payout ratio could be 5.8% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for Safari Industries (India)

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was ₹0.10 in 2015, and the most recent fiscal year payment was ₹3.00. This works out to be a compound annual growth rate (CAGR) of approximately 41% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

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. We are encouraged to see that Safari Industries (India) has grown earnings per share at 34% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

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. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. For instance, we've picked out 1 warning sign for Safari Industries (India) that investors should take into consideration. Is Safari Industries (India) 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.