Asian Paints (NSE:ASIANPAINT) Will Pay A Larger Dividend Than Last Year At ₹28.15

Asian Paints Limited (NSE:ASIANPAINT) will increase its dividend from last year's comparable payment on the 25th of July to ₹28.15. This will take the dividend yield to an attractive 1.2%, providing a nice boost to shareholder returns.

View our latest analysis for Asian Paints

Asian Paints' Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Asian Paints was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.

Looking forward, earnings per share is forecast to rise by 20.8% over the next year. If the dividend continues on this path, the payout ratio could be 56% by next year, which we think can be pretty sustainable going forward.

Asian Paints Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the dividend has gone from ₹5.30 total annually to ₹33.30. This means that it has been growing its distributions at 20% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Asian Paints has impressed us by growing EPS at 20% per year over the past five years. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.

In Summary

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. However, lack of cash flows makes us wary of the potential for cuts in the dividend's future, even though the dividend is generally looking okay. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

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. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 37 analysts we track are forecasting for Asian Paints for free with public analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.