G.M. Breweries (NSE:GMBREW) Will Pay A Larger Dividend Than Last Year At ₹6.00

G.M. Breweries Limited (NSE:GMBREW) will increase its dividend from last year's comparable payment on the 22nd of June to ₹6.00. This will take the annual payment to 1.1% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for G.M. Breweries

G.M. Breweries' Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. However, prior to this announcement, G.M. Breweries' dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS could expand by 6.5% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 12% by next year, which is in a pretty sustainable range.

G.M. Breweries Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was ₹1.28 in 2013, and the most recent fiscal year payment was ₹6.00. This implies that the company grew its distributions at a yearly rate of about 17% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend Has Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that G.M. Breweries has grown earnings per share at 6.5% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for G.M. Breweries' prospects of growing its dividend payments in the future.

G.M. Breweries Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that G.M. Breweries is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for G.M. Breweries that investors should take into consideration. 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.