SIL Investments (NSE:SILINV) Is Paying Out A Dividend Of ₹2.50

SIL Investments Limited (NSE:SILINV) has announced that it will pay a dividend of ₹2.50 per share on the 18th of September. Including this payment, the dividend yield on the stock will be 0.8%, which is a modest boost for shareholders' returns.

See our latest analysis for SIL Investments

SIL Investments' Dividend Is Well Covered By Earnings

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Before making this announcement, SIL Investments was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, EPS could fall by 27.0% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could be 14%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

SIL Investments Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of ₹1.25 in 2013 to the most recent total annual payment of ₹2.50. This implies that the company grew its distributions at a yearly rate of about 7.2% over that duration. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

The Dividend Has Limited Growth Potential

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, things aren't all that rosy. SIL Investments' EPS has fallen by approximately 27% per year during the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

Our Thoughts On SIL Investments' Dividend

Overall, we think SIL Investments is a solid choice as a dividend stock, even though the dividend wasn't raised this year. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 3 warning signs for SIL Investments (of which 1 is a bit concerning!) you should know about. 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.