Safari Industries (India) (NSE:SAFARI) Is Paying Out 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 30th of August. Including this payment, the dividend yield on the stock will be 0.1%, which is a modest boost for shareholders' returns.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

Safari Industries (India)'s Payment Could Potentially Have Solid Earnings Coverage

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. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

The next year is set to see EPS grow by 112.0%. If the dividend continues along recent trends, we estimate the payout ratio will be 5.9%, which is in the range that makes us comfortable with the sustainability of the dividend.

Check out our latest analysis for Safari Industries (India)

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, 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. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Safari Industries (India) has seen EPS rising for the last five years, at 34% per annum. 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, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Safari Industries (India) that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.