Dolat Investments Limited's (NSE:DOLAT) dividend will be increasing to ₹0.20 on 11th of September. Despite this raise, the dividend yield of 0.2% is only a modest boost to shareholder returns.
While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Dolat Investments' stock price has increased by 44% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
Dolat Investments' Earnings Easily Cover the Distributions
If it is predictable over a long period, even low dividend yields can be attractive. However, Dolat Investments' earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.
Looking forward, earnings per share could rise by 70.0% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 1.2%, which is in the range that makes us comfortable with the sustainability of the dividend.
Dolat Investments' Dividend Has Lacked Consistency
Even in its short history, we have seen the dividend cut. There hasn't been much of a change in the dividend over the last 3. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.
The Dividend Looks Likely To Grow
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Dolat Investments has impressed us by growing EPS at 70% per year over the past three years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.
Dolat Investments Looks Like A Great Dividend Stock
Overall, a dividend increase is always good, and we think that Dolat Investments is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Dolat Investments that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.
If you’re looking to trade Dolat Investments, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted
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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.