Alkyl Amines Chemicals (NSE:ALKYLAMINE) Is Increasing Its Dividend To ₹10.00

Alkyl Amines Chemicals Limited (NSE:ALKYLAMINE) will increase its dividend on the 31st of August to ₹10.00. Despite this raise, the dividend yield of 0.4% is only a modest boost to shareholder returns.

Check out our latest analysis for Alkyl Amines Chemicals

Alkyl Amines Chemicals' Dividend Is Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. Prior to this announcement, Alkyl Amines Chemicals' earnings easily covered the dividend, but free cash flows were negative. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Looking forward, earnings per share is forecast to rise by 13.5% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 24% by next year, which is in a pretty sustainable range.

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 2012, the first annual payment was ₹0.60, compared to the most recent full-year payment of ₹10.00. This means that it has been growing its distributions at 32% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Alkyl Amines Chemicals has seen EPS rising for the last five years, at 34% per annum. 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.

Our Thoughts On Alkyl Amines Chemicals' Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Alkyl Amines Chemicals is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 4 warning signs for Alkyl Amines Chemicals (1 is concerning!) that you should be aware of before investing. 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.