Cholamandalam Investment and Finance (NSE:CHOLAFIN) Will Pay A Dividend Of ₹1.30

Cholamandalam Investment and Finance Company Limited's (NSE:CHOLAFIN) investors are due to receive a payment of ₹1.30 per share on 28th of February. The dividend yield is 0.1% based on this payment, which is a little bit low compared to the other companies in the industry.

Check out our latest analysis for Cholamandalam Investment and Finance

Cholamandalam Investment and Finance's Projected Earnings Seem Likely To Cover Future Distributions

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Based on the last payment, Cholamandalam Investment and Finance was earning enough to cover the dividend, but free cash flows weren't positive. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

The next year is set to see EPS grow by 99.5%. If the dividend continues on this path, the payout ratio could be 2.3% by next year, which we think can be pretty sustainable going forward.

Cholamandalam Investment and Finance Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2015, the annual payment back then was ₹0.70, compared to the most recent full-year payment of ₹2.00. This implies that the company grew its distributions at a yearly rate of about 11% 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 Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Cholamandalam Investment and Finance has seen EPS rising for the last five years, at 24% 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 Cholamandalam Investment and Finance'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. 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. As an example, we've identified 1 warning sign for Cholamandalam Investment and Finance that you should be aware of before investing. Is Cholamandalam Investment and Finance not quite the opportunity you were looking for? Why not check out our selection of top 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.