Cupid (NSE:CUPID) Has Announced That It Will Be Increasing Its Dividend To ₹2.00

Cupid Limited (NSE:CUPID) has announced that it will be increasing its periodic dividend on the 7th of December to ₹2.00, which will be 100% higher than last year's comparable payment amount of ₹1.00. This will take the dividend yield to an attractive 1.7%, providing a nice boost to shareholder returns.

Check out the opportunities and risks within the IN Personal Products industry.

Cupid's Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, Cupid's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Unless the company can turn things around, EPS could fall by 1.4% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 40%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Cupid's Dividend Has Lacked Consistency

It's comforting to see that Cupid has been paying a dividend for a number of years now, however it has been cut at least once in that time. This makes us cautious about the consistency of the dividend over a full economic cycle. The dividend has gone from an annual total of ₹0.833 in 2015 to the most recent total annual payment of ₹4.50. This works out to be a compound annual growth rate (CAGR) of approximately 27% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. However, Cupid's EPS was effectively flat over the past five years, which could stop the company from paying more every year.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Cupid will make a great income stock. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We don't think Cupid is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 2 warning signs for Cupid that investors should know about before committing capital to this stock. 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.