Associated Alcohols & Breweries' (NSE:ASALCBR) Dividend Will Be ₹1.00

Associated Alcohols & Breweries Limited (NSE:ASALCBR) has announced that it will pay a dividend of ₹1.00 per share on the 1st of September. This means the annual payment will be 0.2% of the current stock price, which is lower than the industry average.

View our latest analysis for Associated Alcohols & Breweries

Associated Alcohols & Breweries' Payment Has Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. Prior to this announcement, Associated Alcohols & Breweries' earnings easily covered the dividend, but free cash flows were negative. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Looking forward, earnings per share could rise by 10.5% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 4.5% by next year, which is in a pretty sustainable range.

Associated Alcohols & Breweries Is Still Building Its Track Record

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. The dividend has gone from an annual total of ₹0.25 in 2015 to the most recent total annual payment of ₹1.00. This means that it has been growing its distributions at 19% per annum over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Associated Alcohols & Breweries has seen EPS rising for the last five years, at 11% per annum. Associated Alcohols & Breweries definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On Associated Alcohols & Breweries' Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Associated Alcohols & Breweries' 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 Associated Alcohols & Breweries is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 3 warning signs for Associated Alcohols & Breweries you should be aware of, and 1 of them is a bit concerning. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.