Chaman Lal Setia Exports (NSE:CLSEL) Is Increasing Its Dividend To ₹2.50

Chaman Lal Setia Exports Ltd. (NSE:CLSEL) has announced that it will be increasing its dividend from last year's comparable payment on the 22nd of October to ₹2.50. This takes the annual payment to 0.9% of the current stock price, which is about average for the industry.

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Chaman Lal Setia Exports' Projected Earnings Seem Likely To Cover Future Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. However, Chaman Lal Setia Exports' earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share could rise by 8.3% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 14%, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for Chaman Lal Setia Exports

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of ₹0.273 in 2015 to the most recent total annual payment of ₹2.50. This means that it has been growing its distributions at 25% per annum over that time. Chaman Lal Setia Exports 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 Has Growth Potential

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Chaman Lal Setia Exports has seen EPS rising for the last five years, at 8.3% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

We Really Like Chaman Lal Setia Exports' Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. Taking the debate a bit further, we've identified 1 warning sign for Chaman Lal Setia Exports 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 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.