Reliance Industries' (NSE:RELIANCE) Upcoming Dividend Will Be Larger Than Last Year's

Reliance Industries Limited (NSE:RELIANCE) will increase its dividend from last year's comparable payment on the 28th of September to ₹10.00. Despite this raise, the dividend yield of 0.3% is only a modest boost to shareholder returns.

View our latest analysis for Reliance Industries

Reliance Industries' Dividend Is Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Before making this announcement, Reliance Industries was paying a whopping 115% as a dividend, but this only made up 9.7% of its overall earnings. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

The next year is set to see EPS grow by 45.2%. Assuming the dividend continues along recent trends, we think the payout ratio could be 7.3% by next year, which is in a pretty sustainable range.

Reliance Industries Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of ₹4.75 in 2014 to the most recent total annual payment of ₹10.00. This implies that the company grew its distributions at a yearly rate of about 7.7% over that duration. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

Reliance Industries Could Grow Its Dividend

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Reliance Industries has grown earnings per share at 8.4% per year over the past five years. Reliance Industries definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On Reliance Industries' Dividend

Overall, we always like to see the dividend being raised, but we don't think Reliance Industries will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

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. For example, we've picked out 1 warning sign for Reliance Industries that investors should know about before committing capital to this stock. Is Reliance Industries not quite the opportunity you were looking for? Why not check out our selection of top 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.

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