Emkay Global Financial Services (NSE:EMKAY) Is Increasing Its Dividend To ₹1.50

Emkay Global Financial Services Limited (NSE:EMKAY) will increase its dividend from last year's comparable payment on the 7th of September to ₹1.50. This takes the annual payment to 0.9% of the current stock price, which unfortunately is below what the industry is paying.

View our latest analysis for Emkay Global Financial Services

Emkay Global Financial Services' Payment Has 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. Before making this announcement, Emkay Global Financial Services was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS could expand by 28.6% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 9.5% by next year, which is in a pretty sustainable range.

Emkay Global Financial Services' Dividend Has Lacked Consistency

It's comforting to see that Emkay Global Financial Services has been paying a dividend for a number of years now, however it has been cut at least once in that time. This makes us cautious about the consistency of the dividend over a full economic cycle. The annual payment during the last 8 years was ₹1.00 in 2016, and the most recent fiscal year payment was ₹1.50. This implies that the company grew its distributions at a yearly rate of about 5.2% over that duration. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

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. Emkay Global Financial Services has seen EPS rising for the last five years, at 29% per annum. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

Emkay Global Financial Services Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Emkay Global Financial Services is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Emkay Global Financial Services has 3 warning signs (and 1 which is concerning) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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