Chambal Fertilisers and Chemicals (NSE:CHAMBLFERT) Will Pay A Dividend Of ₹3.00

Chambal Fertilisers and Chemicals Limited's (NSE:CHAMBLFERT) investors are due to receive a payment of ₹3.00 per share on 12th of October. This means the annual payment is 2.7% of the current stock price, which is above the average for the industry.

View our latest analysis for Chambal Fertilisers and Chemicals

Chambal Fertilisers and Chemicals' Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, Chambal Fertilisers and Chemicals was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 52.5%. If the dividend continues on this path, the payout ratio could be 23% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2013, the annual payment back then was ₹1.90, compared to the most recent full-year payment of ₹7.50. This implies that the company grew its distributions at a yearly rate of about 15% over that duration. Chambal Fertilisers and Chemicals has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's encouraging to see that Chambal Fertilisers and Chemicals has been growing its earnings per share at 16% a year over the past five years. Chambal Fertilisers and Chemicals definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like Chambal Fertilisers and Chemicals' Dividend

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for Chambal Fertilisers and Chemicals that you should be aware of before investing. Is Chambal Fertilisers and Chemicals 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.