Carborundum Universal's (NSE:CARBORUNIV) Dividend Will Be ₹2.00

The board of Carborundum Universal Limited (NSE:CARBORUNIV) has announced that it will pay a dividend on the 24th of August, with investors receiving ₹2.00 per share. Including this payment, the dividend yield on the stock will be 0.3%, which is a modest boost for shareholders' returns.

View our latest analysis for Carborundum Universal

Carborundum Universal's Payment Has Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. However, Carborundum Universal's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 84.2%. Assuming the dividend continues along recent trends, we think the payout ratio could be 9.6% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of ₹2.00 in 2013 to the most recent total annual payment of ₹3.50. This works out to be a compound annual growth rate (CAGR) of approximately 5.8% a year over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. We are encouraged to see that Carborundum Universal has grown earnings per share at 14% per year over the past five years. Carborundum Universal definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Carborundum Universal Looks Like A Great Dividend Stock

Overall, we like to see the dividend staying consistent, and we think Carborundum Universal might even raise payments in the future. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 9 analysts we track are forecasting for Carborundum Universal for free with public analyst estimates for the company. 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.