Uttam Sugar Mills' (NSE:UTTAMSUGAR) Shareholders Will Receive A Bigger Dividend Than Last Year

Uttam Sugar Mills Limited's (NSE:UTTAMSUGAR) dividend will be increasing from last year's payment of the same period to ₹2.50 on 22nd of October. Even though the dividend went up, the yield is still quite low at only 0.7%.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Uttam Sugar Mills' stock price has increased by 40% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

Check out our latest analysis for Uttam Sugar Mills

Uttam Sugar Mills' Dividend Is Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, Uttam Sugar Mills was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

If the trend of the last few years continues, EPS will grow by 22.5% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 6.7%, which is in the range that makes us comfortable with the sustainability of the dividend.

Uttam Sugar Mills Doesn't Have A Long Payment History

The company hasn't been paying a dividend for very long at all, so we can't really make a judgement on how stable the dividend has been. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that Uttam Sugar Mills has been growing its earnings per share at 23% a year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

Uttam Sugar Mills Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Uttam Sugar Mills is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 2 warning signs for Uttam Sugar Mills 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.