Cholamandalam Investment and Finance (NSE:CHOLAFIN) Will Pay A Dividend Of ₹0.70

The board of Cholamandalam Investment and Finance Company Limited (NSE:CHOLAFIN) has announced that it will pay a dividend on the 29th of August, with investors receiving ₹0.70 per share. 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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Cholamandalam Investment and Finance's Future Dividend Projections Appear Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. 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 90.2%. 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.

View our latest analysis for Cholamandalam Investment and Finance

Cholamandalam Investment and Finance Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of ₹0.70 in 2015 to the most recent total annual payment of ₹2.00. This means that it has been growing its distributions at 11% per annum over that time. 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

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Cholamandalam Investment and Finance has impressed us by growing EPS at 30% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

Our Thoughts On Cholamandalam Investment and Finance's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We don't think Cholamandalam Investment and Finance is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 2 warning signs for Cholamandalam Investment and Finance that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield 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.