Shiva Texyarn (NSE:SHIVATEX) Is Increasing Its Dividend To ₹1.40

The board of Shiva Texyarn Limited (NSE:SHIVATEX) has announced that it will be paying its dividend of ₹1.40 on the 11th of October, an increased payment from last year's comparable dividend. This takes the dividend yield to 0.9%, which shareholders will be pleased with.

View our latest analysis for Shiva Texyarn

Shiva Texyarn's Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Shiva Texyarn'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.

If the trend of the last few years continues, EPS will grow by 9.7% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 9.5%, which is in the range that makes us comfortable with the sustainability of the dividend.

Shiva Texyarn's Dividend Has Lacked Consistency

Looking back, the company hasn't been paying the most consistent dividend, but with such a short dividend history it could be too early to draw solid conclusions. Since 2018, the annual payment back then was ₹1.60, compared to the most recent full-year payment of ₹1.40. Doing the maths, this is a decline of about 3.3% per year. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

We Could See Shiva Texyarn's Dividend Growing

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Shiva Texyarn has impressed us by growing EPS at 9.7% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Our Thoughts On Shiva Texyarn's Dividend

Overall, we always like to see the dividend being raised, but we don't think Shiva Texyarn will make a great income stock. While Shiva Texyarn is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

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. To that end, Shiva Texyarn has 4 warning signs (and 1 which is a bit concerning) we think you should know about. Is Shiva Texyarn 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.