Shalby (NSE:SHALBY) Is Due To Pay A Dividend Of ₹1.00

Shalby Limited (NSE:SHALBY) will pay a dividend of ₹1.00 on the 26th of October. This means the annual payment is 0.7% of the current stock price, which is above the average for the industry.

View our latest analysis for Shalby

Shalby's Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, Shalby was earning enough to cover the dividend, but free cash flows weren't positive. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Over the next year, EPS is forecast to expand by 38.8%. 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.

Shalby Is Still Building Its Track Record

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The dividend has gone from an annual total of ₹0.50 in 2019 to the most recent total annual payment of ₹1.00. This means that it has been growing its distributions at 26% per annum over that time. Shalby has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

We Could See Shalby's Dividend Growing

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Shalby has seen EPS rising for the last five years, at 8.2% per annum. Shalby definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While Shalby is earning enough to cover the payments, the cash flows are lacking. We don't think Shalby is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for Shalby that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.