Atul (NSE:ATUL) Has Announced That It Will Be Increasing Its Dividend To ₹25.00

Atul Ltd (NSE:ATUL) will increase its dividend on the 28th of August to ₹25.00. Even though the dividend went up, the yield is still quite low at only 0.3%.

See our latest analysis for Atul

Atul's Dividend Is Well Covered By Earnings

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Atul is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Over the next year, EPS is forecast to expand by 34.4%. If the dividend continues on this path, the payout ratio could be 9.8% by next year, which we think can be pretty sustainable going forward.

Atul Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2012, the first annual payment was ₹4.50, compared to the most recent full-year payment of ₹25.00. This means that it has been growing its distributions at 19% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Atul has grown earnings per share at 13% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Atul will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Atul is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. To that end, Atul has 2 warning signs (and 1 which is significant) we think you should know about. 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.