Aegis Logistics (NSE:AEGISCHEM) Is Paying Out A Larger Dividend Than Last Year

Aegis Logistics Limited (NSE:AEGISCHEM) has announced that it will be increasing its dividend on the 18th of November to ₹2.00. Although the dividend is now higher, the yield is only 0.8%, which is below the industry average.

View our latest analysis for Aegis Logistics

Aegis Logistics' 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. However, based ont he last payment, Aegis Logistics was earning enough to cover the dividend pretty comfortably. However, with more than 75% of free cash flow being paid out to shareholders, future growth could potentially be constrained.

Looking forward, earnings per share is forecast to rise by 48.5% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 20%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2011, the first annual payment was ₹0.40, compared to the most recent full-year payment of ₹2.00. This means that it has been growing its distributions at 17% per annum over that time. Aegis Logistics has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Aegis Logistics has grown earnings per share at 17% per year over the past five years. Aegis Logistics definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Aegis Logistics will make a great income stock. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Aegis Logistics has been making. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 2 warning signs for Aegis Logistics that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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