ACC (NSE:ACC) Is Paying Out A Dividend Of ₹7.50

The board of ACC Limited (NSE:ACC) has announced that it will pay a dividend on the 26th of July, with investors receiving ₹7.50 per share. Based on this payment, the dividend yield will be 0.4%, which is fairly typical for the industry.

Our free stock report includes 1 warning sign investors should be aware of before investing in ACC. Read for free now.

ACC's Future Dividend Projections Appear Well Covered By Earnings

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Based on the last payment, ACC was earning enough to cover the dividend, but free cash flows weren't positive. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Over the next year, EPS is forecast to expand by 18.0%. Assuming the dividend continues along recent trends, we think the payout ratio could be 4.6% by next year, which is in a pretty sustainable range.

View our latest analysis for ACC

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2015, the annual payment back then was ₹34.00, compared to the most recent full-year payment of ₹7.50. This works out to a decline of approximately 78% over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. It's encouraging to see that ACC has been growing its earnings per share at 12% a year over the past five years. 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.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While ACC is earning enough to cover the payments, the cash flows are lacking. We don't think ACC 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for ACC that investors need to be conscious of moving forward. Is ACC not quite the opportunity you were looking for? Why not check out our selection of top 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.