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

Chambal Fertilisers and Chemicals Limited (NSE:CHAMBLFERT) has announced that it will pay a dividend of ₹3.00 per share on the 12th of October. The dividend yield will be 2.9% based on this payment which is still above the industry average.

See 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 53.1%. If the dividend continues on this path, the payout ratio could be 32% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2013, the annual payment back then was ₹1.90, compared to the most recent full-year payment of ₹7.50. This means that it has been growing its distributions at 15% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Chambal Fertilisers and Chemicals has grown earnings per share at 16% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

We Really Like Chambal Fertilisers and Chemicals' Dividend

Overall, we like to see the dividend staying consistent, and we think Chambal Fertilisers and Chemicals might even raise payments in the future. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 2 warning signs for Chambal Fertilisers and Chemicals that investors should take into consideration. 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.