Steel City Securities (NSE:STEELCITY) Has Announced A Dividend Of ₹1.00

The board of Steel City Securities Limited (NSE:STEELCITY) has announced that it will pay a dividend of ₹1.00 per share on the 3rd of December. This means the annual payment is 5.0% of the current stock price, which is above the average for the industry.

View our latest analysis for Steel City Securities

Steel City Securities' Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, Steel City Securities' earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

Looking forward, earnings per share could rise by 16.7% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 35% by next year, which we think can be pretty sustainable going forward.

Steel City Securities' Dividend Has Lacked Consistency

Looking back, the dividend has been unstable but with a relatively short history, we think it may be a bit early to draw conclusions about long term dividend sustainability. Since 2018, the first annual payment was ₹2.50, compared to the most recent full-year payment of ₹3.00. This implies that the company grew its distributions at a yearly rate of about 6.3% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Steel City Securities might have put its house in order since then, but we remain cautious.

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. We are encouraged to see that Steel City Securities has grown earnings per share at 17% per year over the past five years. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

Our Thoughts On Steel City Securities' Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Steel City Securities' payments, as there could be some issues with sustaining them into the future. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Steel City Securities is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 3 warning signs for Steel City Securities 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 performing dividend stock.

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.

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