Asian Paints (NSE:ASIANPAINT) Is Increasing Its Dividend To ₹5.15

The board of Asian Paints Limited (NSE:ASIANPAINT) has announced that it will be increasing its dividend by 17% on the 25th of November to ₹5.15, up from last year's comparable payment of ₹4.40. Based on this payment, the dividend yield for the company will be 0.9%, which is fairly typical for the industry.

See our latest analysis for Asian Paints

Asian Paints' Dividend Is Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. The last dividend was quite easily covered by Asian Paints' earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Looking forward, earnings per share is forecast to rise by 32.8% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 44% by next year, which is in a pretty sustainable range.

Asian Paints Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2013, the dividend has gone from ₹4.60 total annually to ₹25.65. This works out to be a compound annual growth rate (CAGR) of approximately 19% a year over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Asian Paints has seen EPS rising for the last five years, at 19% per annum. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

We Really Like Asian Paints' Dividend

Overall, a dividend increase is always good, and we think that Asian Paints is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 35 Asian Paints analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Is Asian Paints 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.